Blackstone markets bonds backed by 11 Manhattan apartment buildings
Blackstone Real Estate Partners is tapping the commercial mortgage-backed securities market to finance a new loan backed by its fee interest in 11 Manhattan apartment buildings.
The $217.7 million BX 2019-MMP Mortgage Trust is a securitization of an interest-only loan issued to BREP backed by the cash flow from the apartments, which are in New York’s Upper East Side, Murray Hill and Chelsea neighborhoods.
The properties include 637 apartments, 612 of which are market-rent units that are neither rent stabilized nor rent controlled through New York City regulations.
Most of the buildings have undergone extensive, or “gut,” renovations since Blackstone’s real estate arm began acquiring the buildings in 2015. The sponsor has spent $34.7 million renovating the properties since 2015, including both interior and common-area upgrades.
Most of the renovation costs were applied to the “marquee” property in the pool: the Grove apartments in Chelsea, according to Moody’s Investors Service. The Grove is a 1986-vintage building at 250 W. 190th Street that has undergone $19.5 million in capital improvements.
It is also the largest property in the pool, with 200 units, and is 97.5% leased.
Blackstone also took out $93.3 million mezzanine financing that is not included in the transaction, and will add $47.7 million more equity into the portfolio of buildings at closing for the loan. The loan has a two-year term with three one-year extension options and a coupon of 3.88%. (The initial weighted average spread is 1.578%.)
The loan, to be supported by an estimated $15.3 million in annual cash flow, was issued by Morgan Stanley. The loan has a relatively high 126.8% loan-to-value ratio, but is supported by 1.45x debt-to-service coverage.
The BX trust will issue nine classes of notes through the transaction, including an $11.72 million Class A offering with a preliminary Aaa rating from Moody’s.