DBRS Confirms Two Classes of COMM 2012-9W57

DBRS Limited (DBRS) has today confirmed the ratings of the following Commercial Mortgage Pass-Through Certificates, Series 2012 9W57 issued by COMM 2012-9W57:

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

All trends are Stable.

The rating confirmations reflect the continued stable performance of the transaction. This transaction originally closed in March 2012, consisting of a $625 million fixed-rate loan secured by a 50-story, Class A office tower located in Midtown Manhattan. Built in 1972, the property is located at 9 West 57th Street and offers unobstructed views of Central Park, which is located directly north of the building. Due to its irreplaceable location, the property is considered a premier building and is able to attract elite office tenants, including hedge funds, private equity firms and luxury retailers, which are willing to pay a premium in rental rates. Historically, occupancy at the building has been below market averages, but this is offset by the above-average market rental rates that the sponsor is able to maintain. At issuance, there was a $25.0 million leasing reserve and, as of the January 2016 remittance, the current balance of the reserve is $2.0 million.

According to the September 2015 rent roll, the property was 67.2% occupied, which has increased when compared with the prior year’s occupancy rate of 54.8%. The largest increase came from Chanel, which originally occupied 5.3% of net rentable area (NRA) with a lease expiration in December 2015. In addition to renewing its lease, the tenant expanded its space; it currently occupies 13.3% of the NRA and is now the largest tenant at the property. The average rental rate of Chanel’s new lease is $106.38 per square foot (psf) and is consistent with its original lease. An expiration date for the new lease was not provided and DBRS has contacted the servicer for an update. According to the most recent financials available, the annualized Q3 2015 debt service coverage ratio was 3.67 times (x), increasing compared with YE2014’s ratio of 2.93x.

This loan is sponsored by Sheldon H. Solow, the original developer of the subject. He has extensive real estate development experience within the New York City market. As a part of his strategy to maintain the elite status of the subject, Mr. Solow is selective regarding the tenants at the property and, as a result, the building operates at above-average vacancy levels. According to CoStar, the average vacancy rate within the Plaza District submarket for Class A office buildings is 10.1%, with average rental rates of $74.64 psf. In comparison, the average in-place rental rate at the subject is $142.51 psf for the office portion of the building.

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

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

The applicable methodologies are North American CMBS Rating Methodology (June 2015) and CMBS North American Surveillance (December 2015), which can be found on our website under Methodologies.