DBRS Confirms Two Classes of COMM 2012-9W57

DBRS has today confirmed the ratings of the following classes of COMM 2012-9W57:

-- Class A at AAA (sf)
-- Class X at AAA (sf)

The trends are Stable.

The collateral consists of a $625 million fixed-rate loan secured by 9 West 57th Street, a 1.67 million sf, 50-story Class A office tower built in 1972. It is considered one of the premier office towers in Manhattan because of its location directly south of Central Park, which provides unobstructed views of the Park starting at the 27th floor. Tenancy at the property is considered strong, including a list of elite hedge funds, investment managers, financial institutions and luxury retailers.

At issuance, the property was 56.2% occupied as of the January 2012 rent roll. The property’s occupancy has been very low since 2008, when Bank of America vacated approximately 40% of the NRA upon lease expiration. According to the January 2012 rent roll, the property was 56.9% leased, with a few small leases signed since issuance. Five tenants cumulatively representing approximately 9.5% of the NRA are scheduled to expire in 2013, including the property’s fourth-largest tenant, Natixis North America Inc., which has approximately 4.6% of the NRA on a lease through May 2013. It was known at issuance that this tenant would likely not renew the space, as a lease had already been signed for space at a competing property.

According to CoStar, the property’s Plaza District submarket had an overall vacancy rate of 7.9% for the 159 Class A properties (73.02 million sf) at Q1 2013, with an average rental rate of $70.56 psf. These figures are in line with market statistics at issuance. The sponsor is reportedly asking $200 psf for the vacant office space at the subject property, which currently has an average rental rate of approximately $144 psf as of the December 2012 rent roll. Leases signed at the property between January 2011 and July 2011 averaged $141 psf, as DBRS noted at issuance.

According to the servicer, the Q3 2012 DSCR was 2.26x, with a debt yield of 8.7%. However, the servicer’s NCF figure includes $12 million in ground rent paid to a borrower-controlled entity. As the leasehold interest holder and the leased fee interest holder are controlled by a common entity, DBRS excluded that expense in its underwriting at issuance. Excluding the figure from the servicer’s analysis results in a DSCR of 2.76x and a debt yield of 10.7%, which is in line with the DBRS term DSCR of 2.85x and term debt yield of 10.8% at issuance.

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

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

The applicable methodologies are CMBS Rating Methodology and CMBS North American CMBS Surveillance Methodology, which can be found on our website under Methodologies.