KBRA Assigns Preliminary Ratings to MED 2024-MOB
24 Apr 2024 | New York
KBRA announces the assignment of preliminary ratings to three classes of MED 2024-MOB, a CMBS single-borrower securitization.
The collateral for the transaction is a $450.5 million floating rate, interest-only mortgage loan. The loan has an initial two-year term with three, one-year extension options and requires monthly interest-only payments based on a SOFR cap of 5.50%. The loan is secured by 34 medical office properties, including the borrower's fee simple interest in 28 properties (84.1% of loan balance) and the leasehold interests in six properties (15.9%), which together total 1.9 million sf. The portfolio properties are located in 13 states, of which the three largest are New York (29.4%), Texas (20.4%), and Indiana (10.1%). As of March 2024, the assets are 88.2% leased to over 160 unique tenants, including the largest tenant, Crystal Run Healthcare, LLP (HQCWT) which generates 28.0% of the portfolio's base rent. No other tenant comprises more than 6.5% of the portfolio's base rent. The majority of the portfolio's base rent (53.2%) is generated by HQCWT's or a subsidiary of an HQCWT.
KBRA’s analysis of the transaction included a detailed evaluation of the properties’ cash flows using our U.S. CMBS Property Evaluation Methodology and the application of our U.S. CMBS Single Borrower & Large Loan Rating Methodology. In addition, KBRA also relied on its Global Structured Finance Counterparty Methodology for assessing counterparty risk in this transaction, its Methodology for Rating Interest-Only Certificates in CMBS Transactions, and its ESG Global Rating Methodology, to the extent deemed applicable.
The results of our analysis yielded a KBRA net cash flow (KNCF) for the portfolio of approximately $42.4 million, which is 7.1% below the issuer’s NCF, and an aggregate KBRA value of approximately $474.1 million ($244 per sf), which is 33.1% less than the appraiser’s aggregate as-is appraised value of $709.2 million. The resulting in-trust KBRA Loan to Value (KLTV) is 95.0%. In our analysis of the transaction, we also reviewed and considered third-party engineering, environmental, and appraisal reports, the results of our site inspections of 12 (53.5%) of the portfolio properties, and legal documentation review.
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