Benchmark 2021-B27 is readying $1.1 billion in conduit commercial mortgage-backed securities issued from a pool secured mostly by loans on office and industrial properties, and most of which were originated during the full onslaught of the COVID-19 pandemic.
Twenty-two classes of notes will be issued from 47 loans secured by 170 properties. Two loans originated prior to the onset of the COVID-19 pandemic, the Alabama Hilton Portfolio, collateralized by three hotels in Daphne, Ala.; and the Residence Inn Florence – a 94-key, extended-stay hotel in Florence, South Carolina, were hotel properties, according to Kroll Bond Rating Service. Both were refinances.
The loan on the Alabama Hilton Portfolio was originated in January 2020, and then the Benchmark 2020-B17 CMBS transaction securitized a $12 million non-trust pari passu note. Then in September the borrower was granted forbearance on the loan, KBRA says.
Overall, the pool has a weighted average in-trust KLTV of 99.4%. Additionally, about 63% of the pool has an exposure to loans with KLTVs in excess of 100%, an exposure level that is slightly above the average of 61.5%, at least in comparison to other pools, which ranged from 50.8% to 77.4%.
Of some concern is that the pool has uneven individual loan-to-value distribution among the loans in the pool, or credit barbelling. Under that condition, losses on loans with higher LTVs might not be enough to offset losses from loans with lower leverage.
In another observation, nine loans representing 35.1% of the pool either have existing subordinate secured indebtedness, or will permit future debt like that. The presence of that existing or future additional indebtedness brings the all-in KLTV to 111.7%.
In one potential rating positive, the properties are located across 29 metro statistical areas, making the pool geographically diverse, KBRA says. Newn York, with 27.8% of the pool’ exposure; Los Angeles, with 7.8%; San Francisco, with 7.7%, Birmingham, Ala., with 5.5%, and Seattle, with 4.7%, represent the top five markets in the deal.
Benchmark’s liability structure includes 15 classes of notes, with balances ranging from $11.8 million to $265 million. The six highest rated notes, which KBRA expects to rate ‘AAA’, benefit from a credit enhancement of 30%. All of the notes have a rated final distribution of July 2054, where applicable.
