Fitch Ratings has affirmed 14 classes of
The Rating Outlooks for eight of the affirmed classes were revised to Negative from Stable. The Outlook for one class remains Negative.
RATING ACTIONS
Entity / Debt
Rating
Prior
A-2 36260JAB3
LT
AAAsf
Affirmed
AAAsf
A-3 36260JAC1
LT
AAAsf
Affirmed
AAAsf
A-4 36260JAD9
LT
AAAsf
Affirmed
AAAsf
LT
AAAsf
Affirmed
AAAsf
A-S 36260JAH0
LT
AAAsf
Affirmed
AAAsf
B 36260JAJ6
LT
AA-sf
Affirmed
AA-sf
C 36260JAK3
LT
A-sf
Affirmed
A-sf
D 36260JAL1
LT
BBBsf
Affirmed
BBBsf
E 36260JAQ0
LT
BBB-sf
Affirmed
BBB-sf
Page
of 2
VIEW ADDITIONAL RATING DETAILS
KEY RATING DRIVERS
Increased 'Bsf' Loss Expectations: Fitch's current ratings incorporate a deal-level 'Bsf' rating case loss of 4.9%. There are seven Fitch Loans of Concern (FLOCs; 34.4% of the pool), including two loans (4.6%) in special servicing.
The Negative Rating Outlooks on classes A-S, X-A, B, C, X-B, D, X-D, E and F reflect increased pool loss expectations since Fitch's prior rating action, driven primarily by further performance declines of two FLOCs that recently transferred to special servicing,
Downgrades of up to one category are possible with continued occupancy and cashflow deterioration of the FLOCs, a prolonged workout on the specially serviced loans or updated appraisal valuations come in significantly below Fitch's expectations.
The largest contributor to overall pool loss expectations and largest increase in loss since the prior rating action is the
As of
The portfolio has a granular rent roll with over 200 tenants, and no individual tenant accounts for more than 3% of the portfolio NRA. The largest tenants in the portfolio include the
Fitch's 'Bsf' rating case loss of 27.9% (prior to concentration add-ons) reflects an 11% cap rate, 10% stress to the YE 2023 NOI and factors an increased probability of default due to the declining portfolio occupancy and loan's delinquency status.
The second largest contributor to overall pool loss expectations and second largest increase in loss since the prior rating action is the 57th
The loan transferred to special servicing in
The third largest contributor to overall pool loss expectations is
The latest reported YE 2022 occupancy for the multifamily portion was 80%, up from a historical low of 67% in
The retail portion, which accounts for approximately 25% of the property's revenue, is occupied by
Fitch's 'Bsf' rating case loss of 18.7% (prior to concentration add-ons) reflects an 8.75% cap rate and a 7.5% stress to the YE 2021 NOI.
Increased CE: As of the
Investment-Grade Credit Opinion Loans: Three loans comprising 23.7% of the transaction received an investment-grade credit opinion at issuance. Fitch no longer considers the
The 365 Bond loan has since repaid in full since issuance. Fitch maintains an investment-grade credit opinion on the Moffett Towers II
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
Downgrades to super senior 'AAAsf' classes are not expected due to their position in the capital structure and expected continued amortization and loan repayments, but may occur if deal-level losses increase significantly and/or interest shortfalls occur.
Downgrades to junior 'AAAsf' rated classes with Negative Outlooks are possible with continued performance deterioration of the FLOCs, increased expected losses and limited to no improvement in class CE, or if interest shortfalls occur.
Downgrades to classes rated in the 'AA-sf' and 'A-sf' categories could occur if deal-level losses increase significantly from outsized losses on larger FLOCs and/or more loans than expected experience performance deterioration and/or default at or prior to maturity.
Downgrades to classes rated 'BBBsf', 'BBB-sf' and 'Bsf' are likely with higher than expected losses from continued underperformance of the FLOCs, in particular
Downgrades to distressed 'CCCsf' ratings would occur should additional loans transfer to special servicing and/or default, as losses are realized and/or become more certain.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
Upgrades to classes rated in the 'AA-sf' and 'A-sf' category may be possible with significantly increased CE, coupled with stable-to-improved pool-level loss expectations and improved performance on the FLOCs, in particular
Upgrades to the 'BBBsf' and 'BBB-sf' rated classes would be limited based on sensitivity to concentrations or the potential for future concentration. Classes would not be upgraded above 'AA+sf' if there is likelihood for interest shortfalls.
Upgrades to the 'Bsf' rated classes would occur only if the performance of the remaining pool is stable, recoveries on the FLOCs are better than expected, and there is sufficient CE to the classes.
Upgrades to 'CCCsf' category rated class is not likely, but may be possible with better than expected recoveries on specially serviced loans and/or significantly higher values on FLOCs.
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
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