Ares Commercial Real Estate Corp. closed on a $309 million securitization of commercial real estate loans.
ACRE Commercial Mortgage FL2014-2 is backed by $367.8 million in primarily whole loans and pari-passu participations, as well as $11.0 million in a funded companion participation acquisition account, according to a presale report published by Moody’s Investors Service.
The deal is structured as a static collateralized loan obligation. On July 31, Moody’s assigned an Aaa’ rating to the senior, $223.9 million tranche, which benefits from effective subordination of 40.9% and an assumed coupon of Libor plus 120 basis points.
At closing on Aug. 15, a total of $309 million of investment grade bonds were sold to third parties at an initial weighted average coupon of LIBOR plus 145 basis points, before expenses, according to a press release that Ares published today.
According to Moody’s, the collateral for the deal consists entirely of first-lien secured commercial mortgages including whole loans, pari-passu participations and one senior participation. Core asset types such as Multifamily, Office, and Industrial comprise 100% of the collateral pool; as a result of this distribution, Moody’s assumed a higher recovery rate for the transaction than comparable transactions.
However, the assets are highly leveraged. Moody’s calculates the average LTV of the contributed debt of 126.0% and all of the collateral assessed at below investment grade.
Separately, Ares has also obtained a $180 million facility with Metropolitan Life Insurance Co. to finance future commercial real estate lending. The facility, which is secured, matures on August 12, 2017, with two one-year renewal options, subject to the satisfaction of certain conditions.
“In 2014, we have accessed more than $1 billion of funding from a wide range of attractive sources, enhancing our ability to provide flexible solutions to our borrowers and attractive returns to our shareholders,” Ares stated in the press release.
As of June 30, 2014 and pro forma for the closing of a $75 million credit facility with City National Banky, which was announced on July 31, the $180 million MetLife Facility, and the $309 million securitization, ACRE has approximately $1.7 billion of borrowing capacity from a diverse set of sources, including commercial banks, insurance companies and the capital markets to support the expansion of its loan portfolio.
