Blackstone taps CMBS for another bioscience cashout refi

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The Blackstone Group is tapping the commercial mortgage bond market to refinance a second portfolio of health sciences office and laboratory properties.

Entities controlled by the Blackstone Real Estate Partners VIII fund obtained an $825 million interest-only, nonrecourse loan on the portfolio from Citi Real Estate Funding, Deutsche Bank and Barclays. Proceeds, along with $500 million in mezzanine debt taken out by Blackstone, are being used to refinance $1.1 billion of balance sheet debt as well as allowing the sponsor to cash out $207.8 million in equity.

The first mortgage is being used to collateralize CCGDBB Commercial Mortgage Trust 2017-BIOC; Kroll Bond Rating Agency and S&P Global Ratings expect to assign triple-A ratings to the a $415.5 million tranche of Class A notes.

Like its predecessor transaction (CGDB Commercial Mortgage Trust 2017-BIO, which was issued in June), the 2017-BIOC pools life and biosciences offices and laboratories. The new portfolio, however, has a far greater geographic concentration in just three markets teaming with bio sciences research and development: Cambridge, Mass., San Diego and San Francisco.

The previous deal involved eight markets in seven states, as well as older properties that command far less average gross rent ($38.55 vs. $56.47 in 2017-BIOC). The average build-date for offices in the first transaction was 2007; 2012 in the newest deal, at a current estimated appraised value of $1.68 billion.

The haircut on the long-term values of the property vary from KBRA’s estimate that the portfolio will decline in long-term sustained value to $964 million — a 42.7% cut — while S&P puts the future value $1.03 billion, or 38.9% below the appraiser’s “as is” estimate.

The 15 office/lab leases in the new transaction are tied to 41 tenants with a weighted average remaining lease term of 7.8 years, according to presale reports. S&P estimates the debt service coverage-ratio at a healthy 2.08%.

Nearly all of the leases extend beyond the loan’s maturity schedule, with only 11.4% of the net rentable area on leases that expire within five years.

The loan-to-value ratio is a “moderate” 80.2%, according to S&P, although the inclusion of the mezzanine financing outside of the trust brings the sponsor’s LTV to 127%.

Nearly all of the buildings (which include 10 single-tenant) that are part of the loan collateral are leased to full capacity.

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