Morningstar DBRS Finalizes Provisional Credit Ratings on COMM 2024-277P Mortgage Trust

DBRS, Inc. (Morningstar DBRS) finalized its provisional credit ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2024-277P (the Certificates) issued by COMM 2024-277P Mortgage Trust (the Trust) as follows:

-- Class A at AAA (sf)
-- Class X at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (sf)
-- Class HRR at A (low) (sf)

All trends are Stable.

The transaction is secured by the borrower's fee-simple interest in 277 Park Avenue, a 51-story, 1.88 million-square foot (sf) office tower. The building takes up a full city block and is bound by Park Avenue, Lexington Avenue, 47th Street, and East 48th Street in Midtown Manhattan's Plaza submarket. The sponsor, the Stahl Organization (Stahl), developed the property in 1963 and invested more than $150.0 million on capital improvements in 2023; the improvements included a new re-mastered lobby and building entrances, modern destination dispatch elevators, a new amenity center with a state-of-the-art gym and common areas, and a new restaurant. The property is currently 97.5% leased to a mix of tenants including major financial firms with a weighted-average (WA) remaining lease term of 7.3 years, including future starting leases. While the collateral is occupied by 31 tenants, the asset does not benefit from the implied diversity given that the two largest tenants, JPMorgan Chase & Co. (JPMC; 898,121 sf) and Sumitomo Mitsui Banking Corp. (314,471 sf), account for approximately 1.2 million sf or 64.5% of the total net rentable area (NRA) and 65.3% of the Morningstar DBRS base rent.

The largest tenant, JPMC, is currently in the process of finishing a new building across the street, which will likely lead to the tenant vacating all or a majority of its space at the collateral. JPMC first downsized at the collateral in 2021 when the tenant vacated around 25% of its total space at that time. Upon its lease expiry in March 2026, JPMC is fully expected to give back 40.3% of its space or 361,802 sf, which represents 19.2% of the total NRA. The remaining 536,319 sf, which represents 28.5% of the total NRA, will expire in March 2028 with only 174,991 sf having a three-year extension option remaining. In total, 54.3% of the total NRA will expire through 2029, the year of the anticipated repayment date. For 25 years, the collateral maintained an occupancy level above 95% until JPMC downsized in 2021. While occupancy dropped below 80%, the sponsor has been able to execute 19 leases for 524,105 sf, or 27.9% of the NRA, by committing nearly $95 million of equity to re-tenant the space to get occupancy to its current level.

The building is owned by 277 Park Avenue, LLC and Stahl is the sponsor of the transaction. Stahl is a privately held, New York-based real estate company that was founded in 1949. Stahl currently has a portfolio that encompasses 5,000,000 sf of commercial space including two other flagship buildings: 122 East 42nd Street and 60 Hudson Street. Furthermore, Stahl maintains a significant residential portfolio with more than 3,000 apartments across various residential assets predominantly on Manhattan's Upper East and Upper West Sides. Stahl affiliates also own Cauldwell Wingate Company, a leading construction company in New York City that was founded in 1910. In addition to its real estate ventures, Stahl owns 100% of Apple Bank, a New York State-chartered savings bank with more than $17.0 billion in assets across 82 branches, and holds passive investments in more than 40 private equity funds.

Morningstar DBRS' credit rating on the Certificates addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related Principal Distribution Amounts and/or Interest Distribution Amounts for the rated classes.

Morningstar DBRS' credit rating does not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, Yield Maintenance Premiums.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (January 23, 2024) at https://dbrs.morningstar.com/research/427030.

Class X is an interest-only (IO) certificate that references a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

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

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

The principal methodology is North American Single-Asset/Single-Borrower Ratings Methodology (July 11, 2024), https://dbrs.morningstar.com/research/436004.

Other methodologies referenced in this transaction are listed at the end of this press release.

With regard to due diligence services, Morningstar DBRS was provided with the Form ABS Due Diligence-15E (Form-15E), which contains a description of the information that a third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While due diligence services outlined in Form-15E do not constitute part of Morningstar DBRS' methodology, Morningstar DBRS used the data file outlined in the independent accountant's report in its analysis to determine the credit ratings referenced herein.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- North American Commercial Mortgage Servicer Rankings (August 23, 2023),
https://dbrs.morningstar.com/research/419592
-- Legal Criteria for U.S. Structured Finance (April 15, 2024),
https://dbrs.morningstar.com/research/431205
-- Rating North American CMBS Interest-Only Certificates (June 28, 2024),
https://dbrs.morningstar.com/research/435294
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (June 28, 2024),
https://dbrs.morningstar.com/research/435293

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.