Banyan Street Capital and Balandis Real Estate are tapping the commercial mortgage bond market to help finance the revitalization of a mixed-use development in downtown Atlanta.
In April, the two owners obtained a $140.3 million first mortgage and a $38.7 million mezzanine loan from JPMorgan Chase Bank.
The first mortgage, which pays only interest of Libor plus 3.58%, and no principal, for its extended term of up to five years, is being used as collateral for a transaction called J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-PTC.
The loan collateral comprises six class B office towers and an underground retail center in downtown Atlanta. The towers are situated atop a Metropolitan Atlanta Rapid Transit Authority station, which provides direct access to all of the city's primary business districts, residential neighborhoods and Hartsfield-Jackson International Airport. The buildings are connected by a series of skywalks that connect to three of downtown Atlanta's larger conference hotels: the Hyatt Regency Atlanta, the Marriott Marquis and the Hilton Downtown.
The trust loan's leverage is low relative to other stand-alone commercial mortgage-backed securities transactions that we've rated, with a 74.3% S&P Global Ratings' LTV ratio based on our valuation, which is 38.1% lower than the appraiser's valuation.
The trust balance has a strong 1.62x debt service coverage ratio, calculated using a weighted average spread of 3.58% (including the trust loan spread of 3.34% and fully funded future advance note spread of 4.55%) plus the cap of 3% and the S&P Global Ratings net cash flow, which is 5.9% lower than the issuer's net cash flow. The loan's DSC based on the current 1.90% Libor rate and the S&P Global Ratings NCF is 1.95x.
The sponsors are committing $49.3 million for capital improvements to improve the property's attractiveness to current and potential tenants. Of the total remaining monies to be spent, $18.3 million has been reserved for upfront, and once spent, an additional $25 million will be funded by the future advance amount.