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.

To access rating and relevant documents, click here.

Click here to view the report.

Methodologies

• CMBS: U.S. CMBS Single Borrower & Large Loan Rating Methodology
• CMBS: U.S. CMBS Property Evaluation Methodology
• CMBS: Methodology for Rating Interest-Only Certificates in CMBS Transactions
• Structured Finance: Global Structured Finance Counterparty Methodology
• ESG Global Rating Methodology

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

Doc ID: 1004048

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