DBRS Morningstar Confirms All Classes of Worldwide Plaza Trust 2017-WWP

DBRS, Inc. (DBRS Morningstar) confirmed its ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2017-WWP issued by Worldwide Plaza Trust 2017-WWP:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which remains in line with DBRS Morningstar’s expectations. The transaction consists of a $705.0 million participation in a $940.0 million first-lien, whole mortgage loan secured by a Class A office property in Manhattan. In addition to the first-lien mortgage, there is $260.0 million of mezzanine debt held outside the trust. The 10-year trust loan matures in November 2027 and is sponsored by a joint venture between SL Green and RXR Realty LLC.

The property totals 1.8 million square feet (sf) and occupies an entire block between 49th Street and 50th Street at 825 Eighth Avenue in New York City's Time Square/West Side submarket. The property also includes 10,592 sf of ground-level retail, and the C and E subway lines are accessible via a station beneath the building. The two largest tenants, Nomura Holding America, Inc. (Nomura) and Cravath, Swaine & Moore LLP (Cravath), collectively account for 68.9% of net rentable area (NRA). Nomura, representing 38% of NRA, uses the space at the property as its North American headquarters. Nomura is an investment-grade tenant and has a lease expiry in September 2033, but the leases also contain a contraction option for up to 10.0% of its total NRA for the five-year period commencing in February 2022 and a one-time termination right for all of its space in January 2027, following an 18-month notice period. Cravath, representing 26.8% of NRA, also uses the space for its headquarters and leases the highest floors at the property. Cravath’s current lease expires in August 2024, and the tenant confirmed in October 2019 that it plans to relocate its headquarters to Two Manhattan West in 2024. Furthermore, Cravath’s contractual rental rate of $95.00 per square foot (psf) is significantly higher than the Midtown West submarket’s asking rents of $72.52 psf according to Reis, which will likely have an adverse effect on cash flow. Mitigating these concerns is the amount of space that Cravath is subleasing to notable tenants including McCarter & English, LLP, Heritage Realty LLC, and AMA Consulting Engineers, P.C. In addition, the loan has a Cravath rollover reserve account, which will begin sweeping cash on August 31, 2023, until the aggregate amount deposited equals $42.4 million, equal to $76.96 psf.

As of the most recent financial reporting ending YE2020, the property was 97% occupied with a debt service coverage ratio of 2.09x

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.

Class X-A 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 ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

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. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar-rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is North American CMBS Surveillance Methodology (March 26, 2021), 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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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