A Blackstone Group real estate affiliate is tapping the commercial mortgage backed securities market to refinance existing debt on 12 retail properties.
The BX Trust 2019-RP will issue six classes of notes backed by a floating-rate, $230 million mortgage loan that — together with $4.5 million of sponsor equity — has refinanced $224 million in debt, funded reserves and paid closing costs for the transaction secured by a dozen retail shopping centers located in seven states.
Eleven of the properties were previously securitized in a Wells Fargo-sponsored conduit transaction in 2015, shortly after Blackstone Real Estate Partners VII LP, along with management firm SITE Centers Corp. (formerly DDR Corp.), purchased the shopping centers in 2014 as part of a larger 71-property acquisition from American Realty Capital Properties totaling $1.9 billion.
The BX Trust transaction includes a $101.65 million Class A notes tranche with an expected AAA rating from Fitch Ratings. Five lower classes totaling $116.5 million will also be issued, with ratings ranging from AA- to B-. The sponsors will retain $11.5 million in a risk retention across a vertical strip of unrated subordinate notes.
The retail properties have 150 unique tenants across 200 leases, and were 86.9% leased. The properties include four grocery-anchored properties making up 17.2% of the loan total and six non-grocery centers totaling 73.5% of the loan size. Two other properties are considered shadow grocery-anchored properties with Target and Walmart stores filling in as anchor tenants.
The properties have an appraised value of $355.1 million, slightly above the original appraisal of $351.6 million in 2015. The highest-appraised property is the $116.5 million Cornerstar shopping center in Aurora, Colo. Cornerstone also happens to have one of the lowest tenancy rates in the portfolio at 75.7%, after the Target-anchored location lost three major tenants in recent years. Blackstone and SITE have engaged the original local developer to re-market the vacancies, according to Fitch.
The mortgage loan, originated by Societe Generale, is an interest-only loan for the entire term, which includes three one-year renewable options. Fitch estimates the debt to service coverage ratio at 1X and a loan-to-value ratio of 89.6% on the loan.
