KBRA Assigns Preliminary Ratings to GRACE 2020-GRCE

NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) announces the assignment of preliminary ratings to eight classes of GRACE 2020-GRCE, a CMBS single-borrower securitization.

The collateral for the transaction is a $750.0 million portion of a $1.25 billion non-recourse mortgage loan. The fixed rate loan has a 10-year term and requires monthly interest-only payments. The loan is secured by the borrower’s fee simple interest in the Grace Building, a 1,6 million sf, 48-story Class-A office tower located in Midtown Manhattan. The LEED Gold certified tower includes 1.5 million sf of office space, 30,877 sf of retail space, 15,730 sf of storage space, and a subterranean parking garage containing 188 parking spaces.

As of October 2020, the property was 94.8% leased to more than 35 tenants. The five largest tenants include The Trade Desk, a publicly-traded technology company; Bain & Company, Inc., a global management consulting firm, Bank of America, N.A., an American multinational investment banking and financial service company; Insight Partners, a venture capital firm, and Israel Discount Bank of New York, an American multinational commercial bank. Together, these five tenants account for 46.5% of total base rent and 42.9% of the total sf.

KBRA’s analysis of the transaction included a detailed evaluation of the properties’ cash flows using our U.S. CMBS Property Evaluation Methodology and the application of our U.S. CMBS Single Borrower & Large Loan Rating Methodology. In addition, KBRA also relied on its Global Structured Finance Counterparty Methodology for assessing counterparty risk in this transaction, to the extent deemed applicable.

The results of our analysis yielded a KBRA net cash flow (KNCF) of approximately $92.1 million. To value the property, we applied a capitalization rate of 6.75% to arrive at a KBRA value of approximately $1.4 billion. The resulting in-trust KBRA Loan to Value (KLTV) is 91.6%. In our analysis of the transaction, we also reviewed and considered third party engineering, environmental, and appraisal reports; the results of our site inspection of the property, and legal documentation review.

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Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a CRA.