Bancorp pools 'transitional' multifamily properties in next conduit CMBS

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Bancorp Bank is pooling 83 commercial mortgages for mostly transitional multifamily and manufacturing housing properties in a $778.23 million conduit securitization, according to presale reports.

The collateral pool for the Bancorp Commercial Mortgage 2019-CRE6 Trust transaction contains 75 loans secured by multifamily/manufactured housing properties, according to Moody’s Investors Service and Kroll Bond Rating Agency. The loans themselves are backed by 104 commercial properties.

Nearly all of the loans, all but two underwritten in the past twenty months, have floating rates and involve acquisition financing, which “generally reflects a more accurate opinion of prevailing market property values,” the Moody’s report said.

The loans are also predominantly interest-only for the initial terms.

Moody’s report stated many of the properties were in “transitional phase” of their life cycle, involving underoccupancy, renovations or “suffering” from previous owners’ lack of adequate financial support, according to Moody’s. “As a result, we believe there is an increased risk that these properties will not achieve healthy stabilized cash flow levels relative to what is secured in other previously rated conduit transactions,” the report said.

Moody’s preliminarily rated the $422.1 million Class A tranche in the deal at Aaa, with 45.75% credit support. Kroll Bond Rating Agency also assigned a triple-A to the senior notes as well as a $60.3 million Class A-S tranche.

Only Kroll supplied early ratings to the seven classes of subordinate notes, ranging from AA- to B-.

Although most of the securing properties have weaker-than-average quality, the largest loan in the pool is a Class A garden apartment complex in Houston, the 384-unit Gramercy Park, built in 1997. Gramercy was purchased for $52 million in May by HM Equity Management.

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