One of Manhattan’s newest premier office development projects – 10 Hudson Yards – has parceled out part of its debut $708 million commercial loan into a commercial mortgage-backed facility of loans through Deutsche Bank and Citigroup.
CD 2016-CD1 is a pool of 32 fixed-rate loans secured by 58 commercial properties, most of recent vintage (the oldest loan was originated in July 2015 for The Prudential Plaza in Chicago). The aggregate outstanding balance of the mortgages is $703.2 million. It features four investment-grade structured credit assessed (SCA) loans with pari passu additional debt (including 10 Hudson) represent 27.7% of the pool.
The portfolio consists of 18 classes of notes, including five fixed-rate Class A bonds totaling $492.3 million that have 30% credit enhancement. Those notes feature triple-A ratings by both Moody’s Investors Service and Fitch Ratings. A subordinate Class A-M notes structure features 19.5% CE, but the agencies diverge on the ratings: A-M is rated ‘Aa3’ by Moody’s, but retains an ‘AAA’ rating from Fitch.
Among the loans is a $65 million portion of the commercial mortgage issued for the newly constructed 10 Hudson Yards 52-story office building in Manhattan’s West Side, which Moody’s Investors Service assessed in a previous report as one of the “premier office buildings” in the borough. A large chunk of that mortgage loan was securitized in a $600 million bond offering through Deutsche and Goldman Sachs.
Other SCA loans in the pool are for the 794,521 square-foot Westfield San Francisco Centre urban regional mall; the 1.3 million square-foot Gas Company Tower commercial business district and parking garage in Los Angeles; and the 1.1 million square-foot Vertex Pharmaceuticals headquarters building in Boston.
The properties are included among seven loans backed by real estate of “superior” quality, according to Moody’s.
The portfolio is more concentrated than the average CMBS deal rated by Moody’s in 2016. The 10 largest loans represent 66.6% of the pool balance, and 11 office properties among the collateral represent 50.7% of the pool balance.
The portfolio also includes a high concentration of interest-only debt service – with nearly 30% of the pool balance (four loans) structured with interest-only payment schedules for the entire tenor of the loan. Another 35% have interest-only periods followed by fixed amortization payments and another 15 loans (24.3% of the pool balance) have regularly amortizing payments that precede a balloon payment obligation.
The full-term interest-only loans that represent 33.8% of the pool are higher than the 2015 average of 23.3% for CMBS conduit/fusion transactions. No loans are fully amortizing during the entire loan term, according to Moody’s.
The deal has five loans with additional subordinate debt, including the four SCA loans. 10 Hudson Yards carries a subordinate promissory note of $191.9 million and $300 million of mezzanine debt; Westfield has a subordinate note of $124.9 million; Gas Company Tower has a subordinate note of $175 million along with $131 million in mezzanine debt; and Vertex enters the pool with $195 million mezzanine debt. Also shouldering subordinate debt is 401 South State Street in Chicago with $7.8 million of mezzanine debt.
The transaction’s loan-to-value ratio is 105.4%, or 122% excluding the SCA loans.