KBRA revises the KBRA Performance Outlooks (KPO) for nine CMBS loans to Underperform following a sensitivity analysis of our 44 CMBS single-borrower securitizations that are secured by office properties. The analysis was part of KBRA’s ongoing surveillance efforts to assess the potential impact of continued deterioration in the office sector amid weakening demand, coupled with a challenging commercial real estate finance landscape caused by rising interest rates and increasing liquidity constraints.

The review considered current property occupancy rates, near-term lease rollover risk, stressed KBRA debt service coverage (KDSC), KBRA debt yield (KDY), and near-term maturity risk for each loan, among other factors. In determining the KPO changes, KBRA also considered the location and quality of the collateral properties and the fundamentals of the relevant office markets.

A KPO is an assessment of Outperform, Perform, or Underperform based on recent and expected collateral performance. It is generally assigned to loans one year after securitization, during KBRA’s first annual surveillance review, and is monitored thereafter. A KPO revision does not necessarily occur before a rating change or indicate a change is imminent. Rather, the KPO assessment provides an indication of performance and allows for comparison to other loans.

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Loans (and their related transactions) with revised KPOs of Underperform are:

• 230 Park Avenue (MSC 2021-230P)
• 237 Park Avenue (MSSG 2017-237P)
• 277 Park Avenue (COMM 2014-277P)
• 280 Park Avenue (280 Park Ave 2017-280P)
• 51 Astor Place (BAMLL 2015-ASTR)
• 101 California Street (CALI 2019-101C)
• Adventus Portfolio (CSMC 2021-ADV)
• Jericho Plaza (NCMS 2022-JERI)
• Project James Portfolio (BSREP 2021-DC)

Related Publications

• CRE Secular Trends: A Long-Term Transformation for Office?
• CMBS Loan Performance Trends: February 2023
• CMBS Trend Watch: February 2023
• Nearly 75% of SASB Rate Caps Below Prevailing Index Margin

• CMBS Office Lease Roll: Markets and Transactions Examined

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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