A group of four major banks is sponsoring another commercial mortgage-backed securities (CMBS) transaction from the Benchmark platform, in a deal where retail properties account for about one third of the collateral pool.
Thirty-eight commercial mortgage loans secured by 50 properties with an aggregate principal balance of $952.3 million make up the deal’s collateral. Of that, $794.9 million in certificates will be offered, according to S&P Global Ratings.
According to S&P, the pooled trust has a debt service coverage ratio of 2.24x. Citi Real Estate Funding Inc., German American Capital Corp., Goldman Sachs Mortgage Co., and JPMorgan Chase Bank N.A. are the mortgage loan sellers and sponsors.
Sixteen retail properties are in the collateral pool, giving it an exposure of 29.6%. That level is meaningfully above the 23.2% average shown in the comparison set, according to Kroll Bond Rating Agency, one of three rating agencies expected to assign ratings to the notes.
Benchmark will issue 21 classes of certificates, with 13 entitled to principal and interest payments. Six classes will receive interest only, one class will receive excess interest and one will receive residual interest, according to KBRA.
Although retail commercial real estate (CRE) properties have been besieged by challenges such as competition from e-commerce and a dip in brick and mortar sales stemming from the COVID-19 pandemic, nine of the retail properties are anchored of entirely occupied by a needs-based retailer such as a grocery store or pharmacy, according to KBRA.
As for lodging, another CRE sector that had been impacted by the COVID-19 pandemic, the pool had an exposure of just 2.6%, slightly below the average of 2.8% for the comparison set. KBRA has an unfavorable view of the lodging sector, because they depend on nightly room rates and tend to have more volatile cash flows than other property types. Only two loans comprise the lodging exposure.
A vast majority of the properties in the loan portfolio, around 78.5%, are located in primary markets, which typically have larger and more diversified economies than secondary and tertiary markets. That surpasses the percentage of 53.0% in the comparison set, according to KBRA.
The deal is geographically diverse, with the properties spread across 50 states and California accounting for the largest concentration, with 51.9%. Massachusetts follows, with 19.8%, New York with 17.8%, and the District of Columbia, with 6.8%.
KBRA and S&P expect to assign ‘AAA’ ratings to classes A-1 through A-5. The ratings vary throughout the rest of the capital structure.
