Fitch Assigns Final Ratings to 1211 Avenue of the Americas Trust 2015-1211 Commercial Mtge P-T Certs

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has assigned the following ratings and Rating Outlooks to 1211 Avenue of the Americas 2015-1211 commercial mortgage pass-through certificates, series 2015-1211:

--$100,000,000a class A-1A1 'AAAsf'; Outlook Stable;

--$490,000,000a class A-1A2 'AAAsf'; Outlook Stable;

--$590,000,000ab class X-A 'AAAsf'; Outlook Stable;

--$119,000,000ab class X-B 'AA-sf'; Outlook Stable;

--$119,000,000a class B 'AA-sf'; Outlook Stable;

--$79,000,000a class C 'A-sf'; Outlook Stable;

--$110,800,000a class D 'BBB-sf'; Outlook Stable;

--$136,200,000a class E 'BBsf'; Outlook Stable.

a Privately placed pursuant to Rule 144A. b Notional Amount and interest only. Interest-only class X-A is equal to the notional balances of class A-1A1 and class A-1A2. Interest only class X-B is equal to the notional balances of class B.

The certificates represent the beneficial ownership in the issuing entity, the primary asset of which is one loan having an aggregate principal balance of approximately $1.035 billion as of the cutoff date and secured by the fee simple interest in 1211 Avenue of the Americas, an approximately 2 million square foot (sf) office building located in the Midtown West submarket of Manhattan. The property is approximately 91.5% leased by 14 office and retail tenants, many of which are investment grade rated. Major tenants include 21st Century Fox and News Corp. (as subtenant of Fox) (55.3% of net rentable area [NRA], rated 'BBB+' by Fitch), Ropes & Gray (17.1% of NRA), Axis Reinsurance (6.1%, rated 'A+' by Fitch), RBC (3.1%, rated 'AA' by Fitch) and Nordea (2.1%, rated 'AA-' by Fitch).

The largest tenant, 21st Century Fox, has a lease expiration in November 2020, with notice needed by November 2018. As reported by the sponsor, the tenant has signed a non-binding letter of intent (LOI) at 2 World Trade Center. The sponsor continues to negotiate with the tenant concerning renewal options, while holding the top three floors vacant since late 2012 to accommodate a possible lease renewal and expansion for 21st Century Fox.

The loan includes approximately $20 million of upfront reserves to address landlord obligations for previously signed new, expansion and renewal leases to Ropes & Gray, Annaly, Nordea, and RBC. The loan also includes springing reserves of up to $95.6 million beginning in November 2017 to address the potential 21st Century Fox rollover and a springing shortfall reserve of up to $36 million beginning in 2019 to address approximately 20 months of debt service and operating expenses following 21st Century Fox's potential lease expiration in November 2020.

The sponsors for the loan are Ivanhoe Cambridge Inc., Beacon Capital Partners, and BCSP IV U.S. Investments, L.P. The loan was originated by JPMorgan Chase Bank, National Association, Citigroup Global Markets Realty Corp., and Morgan Stanley Mortgage Capital Holdings LLC.

KEY RATING DRIVERS

Above Average Property Quality in Strong Location: 1211 Avenue of the Americas consists of a 45-story, class A office building located in Midtown Manhattan. The property is adjacent to Rockefeller Center and in close proximity to subway lines and major transportation hubs.

Strong Historical Occupancy and Diverse Tenant Base: The property was approximately 91.5% leased as of May 2015, and has maintained an average occupancy of 96.7% over the past 10 years, even as the sponsor has held the three top floors (127,673 sf) vacant since late 2012 for a potential major tenant lease renewal and expansion. The property is leased by 14 tenants, many of which are investment grade rated. The top five tenants account for approximately 83.8% of NRA and include 21st Century Fox and News Corp. (as subtenant; 55.3% of NRA; rated 'BBB+' by Fitch), Ropes & Gray (17.1% of NRA), Axis Reinsurance (6.1% of NRA; rated 'A+' by Fitch), RBC (3.1% of NRA; rated 'AA' by Fitch) and Nordea (2.1% of NRA; rated 'AA-' by Fitch).

Major Tenant Lease Expiration: The property faces the expiration of 54 % of the NRA in 2020, which is leased to 21st Century Fox. The tenant has a renewal extension notification date in November 2018. However, according to the sponsor the tenant has signed a non-binding LOI at 2 World Trade Center. If the tenant does not renew, a springing excess cash flow sweep would fund up to $95.6 million ($90 psf) over a two year period for future leasing costs. 21st Century Fox's base rent is $65.43 psf, below market rents for comparable office space and recent lease signings and renewals. Also, if there is an indication prior to the 2018 notice date that the tenant has signed a lease to move to another building, the sponsor could potentially lease the top three floors that have been held off the market to accommodate 21st Century's potential lease renewal and expansion.

RATING SENSITIVITIES

Fitch found that the property could withstand a 71.2% decline in value and an approximate 44% decrease in the trailing 12 months (TTM) May 2015 net cash flow prior to experiencing $1 of loss to any 'AAAsf' rated class.

Fitch performed several stress scenarios in which the Fitch net cash flow (NCF) was stressed. Fitch determined that a 57.6% reduction in Fitch's NCF would cause the notes to break even at a 1.0x debt service coverage ratio (DSCR), based on the actual debt service.

Fitch evaluated the sensitivity of the ratings for class A (rated 'AAAsf') and found that a 8% decline in Fitch NCF would result in a one category downgrade, while a 36% decline would result in a downgrade to below investment grade.

The Rating Sensitivity section in the presale report includes a detailed explanation of additional stresses and sensitivities. Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report. The presale report is available to all investors on Fitch's web site 'www.fitchratings.com'.

DUE DILIGENCE USAGE

Fitch was provided with third-party due diligence information from Ernst & Young LLP. The information was provided on Form ABS Due Diligence-15E. The third-party due diligence focused on a comparison and re-computation of certain characteristics of the mortgage loan. Fitch considered the information in its analysis and the findings did not have an impact on our analysis. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this truncation may be obtained through the link contained on the bottom of the related rating action commentary.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 20 Mar 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=862818

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=735382

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=990014

ABS Due Diligence Form 15E 1

https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=990014&flm_nm=15e_990014_1.pdf

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=990014

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150827005828/en/

Fitch Ratings
Primary Analyst
Jeff Watzke
Senior Director
+1-312-606-2358
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary and Surveillance Analyst
Tiffany Pierce
Associate Director
+1-212-908-9107
or
Committee Chairperson
Robert Vrchota
Managing Director
+1-312-368-3336
or
Media Relations
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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