Blackstone is tapping the commercial mortgage bond market to refinance yet another portfolio of medical properties, cashing out over $300 million of equity in the process.

A fund controlled by the private equity giant has obtained a commitment from four banks, Citigroup, Deutsche Bank, Goldman Sachs and Societe Generale, for a $1.4 billion floating-rate mortgage secured by 27 buildings with a total of over 4 million square feet, according to rating agency presale reports.

Proceeds from this first mortgage, along with $510 million of mezzanine financing provided by the same four banks, were used to refinance approximately $1.54 billion of existing, previously securitized debt, pay transaction costs, and return approximately $301.4 million of equity to the sponsor.

The first mortgage, which pays only interest, and no principal, for its entire extended term of up to seven years, is being used as collateral for an offering of mortgage bonds called BX 2018-BIOA.

The portfolio assets are located in California (58.1%), Massachusetts (37.4%), and Washington (4.5%) and are primarily occupied by life sciences tenants that use their space for office and/or laboratory use. The properties are leased to approximately 100 commercial tenants, with only three that account for more than 5% of base rent: Ironwood Pharmaceuticals (11.7% of base rent), Momenta Pharmaceuticals (8.1%) and Arena Pharmaceuticals (5.2%).

The owner, BRE Edison Holdings, which is associated with the Blackstone Real Estate Partners VIII fund, acquired the properties in January 2016 through its acquisition of BioMed Realty Trust and securitized them in a January 2016 transaction called CGGS 2016-RND transaction. However, the previous loan was originally secured by 31 properties, two of which were sold through tenant purchase options and two of which were released as collateral for the loan and refinanced in separate transactions.

Among the strengths of the deal, according to Fitch, is the fact that the portfolio is well leased at 94%, up from 90.9% when it was originally securitized. Over the past two years, Blackstone has boosted rent by 13% to $38.94 per square foot from $33.64, excluding the one multifamily building in the portfolio, Kendall Crossing Apartments.

Fitch considers the transaction’s aggregate leverage to be high. It puts the debt service coverage ratio and loan-to-value ratio at 0.87x and 103.1%, respectively. Taking into account the $510 million of mezzanine debt held outside the trust, these metrics rise to 0.63x and 140.6%, respectively.

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