Fitch Ratings has affirmed
Fitch only rates the class A notes which remain at 'AAAsf'/ Outlook Stable. The affirmation and Stable Rating Outlook reflect long-term creditworthy tenancy, the high-quality, new construction property, and institutional sponsorship.
RATING ACTIONS
Entity / Debt
Rating
Prior
A 055522AA4
LT
AAAsf
Affirmed
AAAsf
Page
of 1
VIEW ADDITIONAL RATING DETAILS
KEY RATING DRIVERS
Long-Term Tenancy: The property is 99.6% leased to
Steady Performance in 2022: The servicer-reported YE 2022 net cash flow (NCF) of
Fitch incorporated a higher Fitch capitalization rate of 9.25% up from 8.50% at the initial rating action, to reflect increased office sector concerns, leasehold interest with a ground rent payment indexed to CPI. Fitch also considered the credit contraction in the wake of bank sector stresses and worsening macroeconomic conditions that have heightened loan refinance risk.
Fitch Leverage: The
High-Quality, New Construction Asset: The property consists of two office buildings built in 2020 and 2021 and located in the
Single Asset Concentration: The transaction is secured by a single property and, therefore, is more susceptible to single-event risk related to the market, sponsor or the largest tenants occupying the property.
Institutional Ownership: The sponsor of the loan is
Interest-Only: The loan is floating rate and interest only for the entire loan term. The initial maturity of the loan is
Leasehold Interest: The collateral consists of the leasehold interest in Block 16 and Block 24. Both ground leases were newly executed and had a term of 99 years at issuance. The initial ground rent across both ground leases was
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
A downgrade to class A is not considered likely due to the leverage of the transaction, and long-term credit tenancy, but may occur should the loan experience a material and sustained performance decline.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
An upgrade is not possible as class A is rated 'AAAsf'.
Best/Worst Case Rating Scenario
International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
Additional information is available on www.fitchratings.com
(C) 2023 Electronic News Publishing, source