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

DBRS, Inc. (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 transaction’s performance remains in line with DBRS Morningstar’s last review. The loan is collateralized by the fee and leasehold interests in an 849,372-square foot (sf) Class A office property with a LEED Gold designation at 330 Madison Avenue in Midtown Manhattan, New York. The loan is fully 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. Constructed in 1965, the 39-story building has a progressive, tiered floor design with the largest floorplates (approximately 42,000 sf) on Floors two 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. The most recent renovation was completed in 2014, when the sponsor for the subject loan at issuance completed a $121.0 million renovation and lease-up of the property.

In early 2020, Munich Reinsurance Company closed its acquisition of the subject property from a joint venture between Vornado Realty, LLP (25.0%) and the Abu Dhabi Investment Authority, which owned it through its wholly owned subsidiary, Chadison Investment Company, LLC (75.0%). The deal implied a total asset value of $900.0 million, representing a 5.3% decline from the issuance appraised value of $950.0 million. With the acquisition, the subject loan was assumed.

As of the September 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 Ltd. (7.5% of the NRA), whose lease expires in August 2030. 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. At the 2020 lease expiration, HSBC downsized its footprint at the subject to 4.0% of the NRA. At issuance it was noted that leases representing just over 35% of the NRA would be rolling between 2020 and 2021, but the September 2021 reporting showed that the bulk of those leases were renewed.

According to the September 2021 rent roll, the property was 85.7% occupied with an average base rental rate on the office space of $74.05 per sf (psf), compared with the December 2020 figures of 89.2% and $78.74 psf, respectively. According to Q4 2021 Reis data, comparable office properties within the Grand Central submarket reported an asking rent of $84.29 psf, effective rent of $66.95 psf, and a vacancy rate of 7.2%. The Q3 2021 debt service coverage ratio (DSCR) was 2.33 times (x), compared with the YE2020 DSCR of 2.47x. Primarily, losses in base rental income drove the slight DSCR decline in 2021.

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.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for this transaction.

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.

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

The principal methodology is the North American CMBS Surveillance Methodology (March 4, 2022), 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

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.

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

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