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Another Park Ave property leads UBS’ latest CMBS

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UBS is marketing $818 million of mortgage bonds with exposure to an office building many investors may already hold in their portfolios.

The pool of collateral for UBS Commercial Mortgage Trust 2017-C4 consists of 50 fixed-rate loans secured by 85 commercial properties, according to rating agency presale reports. The largest, representing 6.1% of the trust balance, is secured by 237 Park Avenue, a 21-story office building located between 45th and 46th Streets in Midtown Manhattan. The loan is part of a larger, $348 million mortgage that also secures a single-asset CMBS called MSSG Trust 2017-237P.

In all, there are 12 loans totaling $285.25 million that are structured as split loans, where the mortgage properties also secure pari passu loans.

Among the positive features of the transaction, according to Moody's Investors Service, is the fact that four of the loans, including 237 Park Ave, are assigned investment grade Structured Credit Assessments. This helps reduce the overall leverage of the transaction.

Nevertheless, Moody's considers the weighted average loan-to-value ratio of 113.6% to be "high." By comparison, conduits rated by Moody's in 2016 was slightly lower, at 112.9%. Excluding the credit assessement loans, the LTV for this deal is even higher, at 120.9%.

Fitch Ratings puts the LTV lower, at 101.8%, slightly lower than the 101.4% average for conduits it has rated this year. Excluding the credit opinion loans, that rises to 106.7%.

In addition to UBS, Ladder Capital Finance, Rialto Mortgage Finance, CIBC, and Natixis Real Estate Capital contributed loans used as collateral.

Rialto Mortgage Finance is expected to act as the “retaining sponsor” for this securitization; it will purchase and retain an “eligible vertical residual interest” representing of at least 5% of the estimated fair value of all classes of regular certificates issued.

Both Moody’s and Fitch expect to assign triple A ratings to the super senior classes of securities to be issued, which benefit from 30% credit enhancement. The senior class, which benefits from 19.5% credit enhancement will be rated AAA by Fitch and Aa3 by Moody’s.

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