DBRS Assigns Provisional Ratings to J.P. Morgan Chase Commercial Mortgage Securities Trust 2012-HSBC

DBRS has today assigned provisional ratings for the following classes of J.P. Morgan Chase Commercial Mortgage Securities Trust 2012-HSBC. The trends are Stable.

-- Class A at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (high) (sf)

The collateral consists of a $300 million fixed-rate loan secured by a 30-story office tower located at 452 Fifth Avenue in Midtown Manhattan known as HSBC Tower. The subject property is an 864,303 square foot (sf), Class A office tower encompassing an entire block of Fifth Avenue between 39th and 40th Streets. The subject was originally constructed as four buildings. The subject acts as HSBC’s, rated AA by DBRS, North American headquarters. HSBC sold the property to the sponsor in October 2009 in a sale-lease transaction and subsequently consolidated into the lower floors leaving the building approximately 65.4% occupied.

The sponsor has since spent approximately $24.5 million completing a major renovation and has successfully leased the building to 92.0%. Recently signed leases, even after accounting for free rent periods, have been at rental rates exceeding the Grand Central submarket average for Class A space. The subject’s location is considered desirable, adjacent to Bryant Park and the New York Public Library, offering sweeping views of Midtown from the upper floors.

There exists significant term and refinance risk associated with the roll of HSBC in 2020, approximately two years prior to the loan’s maturity date. However, the tenant has recently spent approximately $25 million, $46 psf, over the last three years consolidating its employees on the lower levels, renovating the space and adding three state-of-art trading floors. The subject also provides HSBC the unique opportunity to lease Fifth Avenue retail branch space, Class B office space, Class A office space and vault space that has drive-in and drive-out access for armored cars. In the event HSBC does renew, the loan is structured with an on-going reserve and cash flow sweep.

The loan is considered low leverage financing with DBRS LTV and exit LTV of 79.3% and 72.4%, respectively, after taking into consideration a 40% discount to the appraiser as-is market value estimate of $630 million.

Notes:
All figures are in U.S. dollars unless otherwise noted.

All classes are privately placed pursuant to Rule 144a. The Class X-A and Class X-B balances are notional. DBRS ratings on interest-only certificates address the likelihood of receiving interest based on the notional amount outstanding. DBRS considers the interest-only certificate’s position within the transaction payment waterfall when determining the appropriate rating.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodology is CMBS Rating Methodology, which can be found on our website under Methodologies.