DBRS Morningstar Confirms Ratings on MAD Mortgage Trust 2017-330M

DBRS Limited (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2017-330M issued by MAD Mortgage Trust 2017-330M as follows:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction. The loan is collateralized by the fee and leasehold interests in an 849,372-square foot (sf) Class A office property with a Leadership in Energy and Environmental Design Gold designation at 330 Madison Avenue in Midtown Manhattan, New York. The loan is interest only over its seven-year term.

The subject property is one block west of Grand Central Terminal and two blocks east of Bryant Park on the corner of Madison Avenue and 42nd Street. Originally constructed in 1965, the 39-story building has a progressive, tiered floor design with the largest floorplates (approximately 42,000 sf) on Floors 2 through 12, various setbacks on Floors 13 through 21, and the smallest floorplates (approximately 9,700 sf) on Floors 22 through 39, making it attractive to smaller boutique firms. In 2014, the original sponsorship funded a $121.0 million award-winning renovation and reposition, which included a new exterior glass facade and reconfigured/modernized lobby and subsequently executed over 600,000 sf of new and renewal leases.

In early 2020, Munich Reinsurance Company closed its acquisition of the subject property from the Abu Dhabi Investment Authority, which owned it through its wholly owned subsidiary, Chadison Investment Company, LLC. The deal implied a total asset value of $900.0 million, down from the as-is appraised value of $950.0 million at issuance.

As of the March 2021 rent roll, the three largest tenants, representing a combined 54.3% of the net rentable area (NRA), are Guggenheim Partners (28.5% of the NRA), which uses the property as its headquarters and whose lease expires in March 2028; Jones Lang Lasalle Incorporated (18.3% of the NRA), whose lease expires in May 2032; and Glencore (7.5% of the NRA), whose lease expires in August 2030. The fourth-largest tenant, Point72 Asset Management, L.P. (6.9% of the NRA), has vacated from the subject property and consolidated its offices into the new 55 Hudson Yards development ahead of its August 2021 lease expiration. At issuance, HSBC Bank USA was the second-largest tenant representing 13.3% of the total NRA with an initial lease expiration in April 2020. Upon its initial lease expiration, the tenant downsized its footprint at the subject to 4.0% of the NRA.

As of March 2021, the property was 90.0% occupied at an average gross rental rate of $78.74 per sf (psf), compared with the December 2019 occupancy rate of 95.1% and average gross rental rate of $76.83 psf. The YE2020 debt service coverage ratio (DSCR) was 2.47 times (x) compared with the YE2019 DSCR of 2.37x.

As of Q1 2021 Reis data, comparable office properties within the Grand Central submarket reported an average rental rate of $62.57 psf and a vacancy rate of 9.5%. However, these figures have changed since Q1 2020 when Reis reported figures of $66.77 psf and 7.7%.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes loan-level data for most outstanding CMBS transactions (including non-DBRS Morningstar-rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is North American CMBS Surveillance Methodology (March 26, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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 under Related Documents or by contacting us at [email protected].

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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