Fitch Ratings has affirmed the ratings of New York Housing Development Corporation multi-family mortgage revenue bonds, series 2014 (BAMLL 2014-8SPR). A complete list of rating actions follows at the end of this release.
KEY RATING DRIVERS
Stable Performance: The affirmations are based on overall stable performance since issuance. Based on full-year 2015 financial statements, Fitch net cash flow was stable at $35.5 million compared with $36.5 million at issuance. The slight decrease in Fitch cash flow is primarily the result of an increase in expenses, most of which were administrative expenses. The increase is the result of the borrower Forest City's REIT conversion, which is discussed below. Fitch requested details on whether the increased expenses are one-time or ongoing; however, a response from the master servicer was not provided via the 17g5 provider.
Trophy Multifamily Collateral in Prime Manhattan Location: The New York City Housing Development corporation multi-family mortgage revenue bonds (8 Spruce Street), series 2014 represent the beneficial interests in the mortgage loan securing the fee interest in and associated rents from New York by Gehry located at 8 Spruce Street, New York, NY. Collateral for the loan includes the residential component located on floors 7-76 inclusive of 899-units; the multi-family amenities located on floors 6-8; and a small retail location on the ground floor. The property was completed in 2011 and designed by architect Frank Gehry.
Strong Initial Leasing Momentum and Stable Occupancy: A rent roll from YE 2015 shows occupancy stable at 98% compared with 99% at issuance.
Institutional Sponsorship and Property Management: The sponsorship includes Forest City Enterprises, Inc., Teachers Insurance and Annuity Association (TIAA) and National Real Estate Advisors (NREA). Forest City's multifamily portfolio includes over 25,500 units contained within 77 properties throughout the U.S. Since Fitch's last rating action, Forest City completed its conversion to a REIT. As a result of the conversion, the management agreements pertaining to certain of the complex's components were assigned to a new wholly owned subsidiary of the borrower's parent. The only collateral of the CMBS loan affected is the fitness facility. The change does not affect ownership or management of the broader property.
The issuance includes $346.1 million of taxable bonds (classes A, B, and C) and $203.9 million of tax exempt bonds (classes D, E, and F). The property is subject to a regulatory agreement with the issuer, New York City Housing Development Corp., requiring, among other things, the property to preserve the tax-exempt status of the bonds, preservation of the 421-a real estate tax abatement and that all units continue to be subject to the New York City Rent Stabilization Law.
The loan was originated by the New York City Housing Development Corporation and underwritten by Merrill Lynch, Pierce, Fenner & Smith Inc. (Bank of America Merrill Lynch), Barclays and Citigroup.
The Stable Rating Outlooks indicate that rating changes are unlikely over the next one to two years as performance is expected to remain stable. The loan is interest-only until the anticipated repayment date in 2024, therefore upgrades are unlikely unless performance improves significantly. Should occupancy or portfolio cash flow deteriorate materially, downgrades are possible.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed the following class:
--$276.9 million class A at 'AAAsf'; Outlook Stable.
Fitch does not rate classes B, C, D, E, and F.
Additional information is available at www.fitchratings.com
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 18 Aug 2016)
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
New York City Housing Development Corporation Multi-Family Mortgage Revenue Bonds, Series 2014 (8 Spruce Street) -- Appendix
Dodd-Frank Rating Information Disclosure Form
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