Fitch Ratings has affirmed the ratings of seven classes of 280 Park Avenue 2017-280P Mortgage Trust Commercial Mortgage Pass-Through Certificates.
The Rating Outlooks for classes C, D, E, F, and HRR remain Negative.
RATING ACTIONS
Entity / Debt
Rating
Prior
280 Park Avenue Trust 2017-280P
A 90205FAA8
LT
AAAsf
Affirmed
AAAsf
B 90205FAG5
LT
AA-sf
Affirmed
AA-sf
C 90205FAJ9
LT
A-sf
Affirmed
A-sf
D 90205FAL4
LT
BBB-sf
Affirmed
BBB-sf
E 90205FAN0
LT
BB-sf
Affirmed
BB-sf
F 90205FAQ3
LT
Bsf
Affirmed
Bsf
HRR 90205FAS9
LT
B-sf
Affirmed
B-sf
Page
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VIEW ADDITIONAL RATING DETAILS
KEY RATING DRIVERS
The affirmations reflect the positive leasing momentum since Fitch's last rating action, as well as the high quality and prime location of the collateral, institutional sponsorship and property management, and historically strong performance and quality tenancy.
The Negative Outlooks reflect the potential for downgrades of up to one category should net cash flow (NCF) deteriorate beyond Fitch's view of sustainable performance. This could occur with limited to no leasing progress or if new leasing occurs at rates significantly below recent property activity. As the property is currently in a state of transition, Fitch will continue to monitor leasing activity.
Decline in Occupancy: In 2024 occupancy declined to approximately 86.5% from 93.4% as of the December 2023 rent roll. Tenants vacating include Cohen & Steers, Promontory Financial and Blue Mountain Realty which account for approximately 18% of the NRA. New leases have been signed for approximately 11% of the NRA with PJT Partners and Antares Capital expanding within the building. Occupancy at the property has been historically strong at 93.4% as of the December 2023, 94.6% as of the December 2022, and 94% as of December 2021 and December 2020.
Fitch Net Cash Flow: The Fitch sustainable NCF of $70.5 million used leases in place as of the December 2023 rent roll, removed tenants that vacated in 2024, with credit given to tenants with signed leases occupying in the near term, and tenants in a rent abatement period. Fitch marked-to-market the rents on two tenants with lease expirations in 2024 that are expected to vacate or are paying above market, giving consideration for tenants on higher floors.
Average in-place rents for these tenants are $123 psf and have been reduced to $110 psf. Fitch's sustainable long-term occupancy assumption of 90%, which is above the submarket occupancy, reflects the strong collateral quality and position in the market. According to Costar, the submarket vacancy and availability rates and average asking rents were 14.1%, 14.7% and $91.20 psf, respectively.
The updated Fitch sustainable property NCF of $70.5 million is in line with Fitch's last rating action in 2023 and 1.9% below Fitch's issuance NCF of $71.9 million.
Fitch incorporated a higher Fitch-stressed capitalization rate of 7.50%, up from 7.25% at the last rating action and 7.0% at issuance, to reflect increased office sector concerns.
The servicer-reported YE 2023 NCF has been relatively stable at $78.4 million compared with $75.2 million at YE 2022 and $75.7 million at YE 2021. The YE 2023 NCF debt service coverage ratio (DSCR) declined to 1.10x from 2.36x at YE 2022 and 4.37x at YE 2021 due to an increase in debt service by $39.3 million, solely from increases in LIBOR/SOFR.
Upcoming Loan Maturity/Loan Modification/Extension: The loan was transferred to the special servicer in December 2023 due to the upcoming loan maturity in September 2024. In April, a modification and extension agreement were executed that included an extension of the maturity date from September 2024 to September 2026 with a required $100 million equity contribution to cover operating, leasing and capital expenditures shortfalls.
There are two additional one-year extension options until September 2027 and September 2028 which each require additional capital contributions. Guarantors also delivered a recourse guaranty to the lender which includes standard bankruptcy carve-outs (which was not included at origination). The loan will be transferred back to the master servicer after three payments.
Creditworthy Tenancy: Over 20% of the NRA is leased to creditworthy tenants, including Franklin Templeton, GIC, Orix USA, Wells Fargo Advisors (Wells Fargo & Company is rated A+/F1/Outlook Stable).
Institutional Sponsorship: The loan is sponsored by SL Green (BB+/Negative) and Vornado (BB+/Stable), both of which are major New York City landlords.
High Fitch Leverage: The $ 1.075 billion mortgage loan ($827 psf) has a Fitch stressed DSCR and loan-to-value of 0.77x and 114.4%, respectively, compared to 0.84x and 104.7% at issuance and 0.79x and 110.6% at the last rating action in June 2023.
High-Quality Asset in Strong Location: The collateral consists of a fee simple interest in a 1.3 million-sf, LEED Gold certified, class A office building located on Park Avenue between 48th and 49th Streets in the Plaza office submarket of Midtown Manhattan. The collateral consists of a 33-story east tower, a 43-story west tower and a 17-story base building that connects the east and west towers. The east tower was initially built in 1961, while the west tower was completed in 1968. The property was formerly known as the Bankers Trust Building. At issuance, Fitch assigned a property quality grade of 'A'. The building holds a LEED-Gold designation, which has a positive impact on the ESG score for Waste & Hazardous Materials Management; Ecological Impacts.
The largest tenants are PJT Partners (20.7% of NRA through June 2041), Franklin Templeton Investments (9.9% through October 2031), Investcorp International (5.8% through May 2035), and Antares Capital LP. (5.8%, through 2034). The street-level retail space at issuance was fully leased to Starbucks, Four Seasons Restaurant, and Scottrade, which have all vacated. The Four Seasons space was re-leased to Fasano Restaurant through 2030 with percentage rent lease terms. The restaurant opened in February 2022 and Baretto (bar and lounge space on the 2nd floor) opened in July 2022.
Capital Improvements: The sponsor acquired the property in 2011 and has spent $142.5 million ($113 psf) on the redevelopment of the building. The redevelopment included a complete redesigning of the lobby and exterior plaza, installing a new breezeway, redeveloping the public plazas, repositioning the retail space, upgrading the elevators, electrical and plumbing systems, and installing a modern HVAC system.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
Downgrades may occur should property NCF, occupancy, and/or market conditions deteriorate beyond Fitch's view of sustainable performance. Should leasing momentum slow or reverse course, new leasing on vacant floors occurs at rates well-below current leasing activity of approximately $100 psf on average and/or occupancy on the office portion does not recover to Fitch's sustainable level of 90%, downgrades and Negative Outlooks are possible.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
Upgrades are not considered likely given the single-event risk and the current ratings reflect Fitch's view of sustainable performance, but is possible with significant and sustained leasing that contributes to stabilized performance, including occupancy well in excess of 90% and new leasing on vacant floors well above the average building rate of $100 psf, and the prospect for refinance/payoff is more certain.
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
280 Park Avenue Trust 2017-280P has an ESG Relevance Score of '4' [+] for Waste & Hazardous Materials Management; Ecological Impacts due to {DESCRIPTION OF ISSUE/RATIONALE}, which has a positive impact on the credit profile, and is relevant to the rating[s] in conjunction with other factors.
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
PJT PARTNERS INC. 
