Morningstar DBRS Assigns Provisional Ratings to Hudson Yards 2025-SPRL Mortgage Trust

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2025-SPRL (the Certificates) to be issued by Hudson Yards 2025-SPRL Mortgage Trust (the trust):

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

All trends are Stable.

The Hudson Yards 2025-SPRL Mortgage Trust single-asset/single-borrower transaction is collateralized by the borrower's fee-simple interest and the leasehold interest of a direct wholly-owned subsidiary of the borrower in The Spiral, a 2.8 million-square-foot (sf) trophy office building in Hudson Yards. Hudson Yards is New York's newest neighborhood, between Chelsea and Hell's Kitchen, and is the largest private development in U.S. history. Prior to the larger Hudson Yards development, the 28-acre site over an existing Long Island Railroad rail yard and train tunnels was viewed as one of the largest areas for potential development in Manhattan. The property was delivered in 2022, and the collateral is directly across the street from the eastern portion of the development. The Spiral is situated between West 35th Street, 10th Avenue, West 34th Street, and Hudson Boulevard East and is surrounded by a mix of newer vintage commercial and residential developments, including popular neighborhood attractions like the Vessel, Edge Observation Deck, the High Line, The Shops & Restaurants at Hudson Yards, and Jacob K. Javits Convention Center. The property is included within the Hudson Yards Class A, a trophy micro-market, which is made up of 17.4 million sf of inventory according to a third-party data provider. This micro-market exhibited a vacancy rate of 4.0%, and average asking rent of $137 per sf (psf) as of November 2024. This micro-market's performance compares favorably with that of the general Manhattan submarket, which exhibited a vacancy rate of 17.2% and an asking rental rate of around $73 psf for the same month. The performance of this micro-market relative to the rest of the office sector in Manhattan exemplifies the flight to the quality office sector trend.

The Spiral is a 66-story, 1,031-foot Class A office tower with LEED Gold and Fitwel 2-star certifications. The property features large column-free floorplates, floor-to-ceiling windows, high ceilings ranging from 14 feet to 18 feet, and outdoor terraces on every floor, which cascade around the entire tower. The property has strong set of amenities, including on-site parking, a bike room with showers, and a penthouse amenity space featuring a tenant lounge, cafe, and rentable meeting spaces. The amenities will be further enhanced once the three on-site dining options open, the first of which, Papa San, is currently under construction and set to open in early 2025. Papa San will serve Peruvian cuisine and will later be joined by two restaurants by chef Gabriel Kreuther: an Alsatian brasserie and a European-inspired grab-and-go cafe.

The Spiral is currently 93.8% leased with a WA (weighted average) remaining lease term of 16.7 years. There are over 20 tenants at the property, the majority of which are financial services, healthcare, and law firms. Six tenants are headquartered at the property and another five tenants have their U.S. headquarters at the property. The five largest tenants at the property are Pfizer Inc. (Pfizer), Debevoise & Plimpton LLP (Debevoise), TPG Global, L.L.C (TPG), HSBC Bank USA National Association (HSBC), and AllianceBernstein L.P. (AllianceBernstein). These tenants represent 72.7% of net rentable area (NRA) and 79.7% of Morningstar DBRS gross rent. The majority of leases at the property are deemed long-term credit tenants by Morningstar DBRS, which are investment-grade tenants with leases expiring three years beyond the loan maturity date. Tenants representing 58.5% of NRA and 63.5% of Morningstar DBRS gross rent, respectively, are long-term credit tenants. Additionally, the second-largest tenant, Debevoise, is ranked 37 on the AM Law Top 50 law firms. Debevoise occupies 18.7% of NRA and makes up 21.0% of Morningstar DBRS gross rent. Four leases, totaling 40,603 sf, expire during the five-year loan term. This is a very small portion of the collateral, representing 1.4% of total square footage and 1.9% of Morningstar DBRS gross rent.

The sponsor of the transaction is Tishman Speyer Crown Equities 2007 LLC. The Borrower is owned by the sponsor and other investment vehicles managed and controlled by one or more affiliates of Tishman Speyer Properties, L.P. (Tishman Speyer). Tishman Speyer is a leading owner, developer, operator, and fund manager of first - class real estate across the globe and currently owns a portfolio of over 83 million sf with a value of close to $63 billion. Tishman Speyer is headquartered in New York and has a strong presence in the area, with 20 assets totaling 24.7 million sf. The sponsor will cash out approximately $967.2 billion, equal to approximately 33.9% of the total loan amount, as a result of this transaction. However, based on the sponsor's total cost basis of $3.59 billion, they still have approximately $740 million of remaining cash equity.

Overall, Morningstar DBRS has a favorable view of the credit characteristics of the collateral given its new vintage, tenant amenities, large amount of credit tenancy, and desirable location in an area of Manhattan with great transportation access and a lot of investment. The Spiral is poised to withstand the issues facing office properties as a result of the rise of remote and hybrid work, as premier companies look to lease space at the highest quality office properties on the market.

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 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, the credit ratings do not address 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. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

There were no Environmental, Social, or 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 Factors in Credit Ratings (August 13, 2024), https://dbrs.morningstar.com/research/437781.

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 the North American Single-Asset/Single-Borrower Ratings Methodology (December 13, 2024), https://www.dbrsmorningstar.com/research/444612.

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.

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of final credit ratings on the above-mentioned securities is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

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, 2024),
https://dbrs.morningstar.com/research/438283

Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702

Legal Criteria for U.S. Structured Finance (December 3, 2024),
https://dbrs.morningstar.com/research/444064

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