A pool of 35 commercial loans financing a portfolio of retail, office and multifamily properties—primarily—will secure a $777 million commercial mortgage-backed securities (CMBS) deal, through the BMO 2023-5C2 trust.
The pool is comprised of principal and interest notes, interest-only certificates and VRR interest notes, according to the Kroll Bond Rating Agency. All of the notes, except the VRR interest notes, have a rated final distribution date of November 2056, the KBRA said.
Senior notes A1 through A3 and AS gain 'AAA' ratings from KBRA, while the top three tranches benefit from total credit enhancement of 30.0%. The AS note is the only senior note with a much smaller credit enhancement level, 16.87%, KBRA said. Some 33 sponsors are on the deal underpinning 62 properties, according to KBRA.
As for other ratings, KBRA expects to assign 'AA-' to the class B notes; 'A-' to the class C notes; 'BBB' to the class D notes; 'BBB-' to the class E notes; 'BB' to the class F notes; and 'B-' to the G-RR notes. Among interest-only certificates, the XA, XD, XE and XF notes are expected to receive ratings of 'AAA', 'BBB', 'BBB-' and 'BB', respectively.
Some 62 properties secure the conduit transaction, KBRA said. Loans on retail properties account for 27.1% of the collateral pool, the rating agency said. After that, loans on office properties represent 25.9% of the pool; multifamily properties account for 17.1%; industrial property loans make up 12.5% of the pool and other properties represent 17.5% of the pool, according to the rating agency.
The loans have a coupon of 7.26%, and have a remaining loan term of 4.9 years, KBRA said.
Among the deal's structural features is that full-term, interest only loans account for 98.4% of the pool, while just two loans, or 1.6% are financed with an amortizing balloon, KBRA said. From its own part, KBRA assigns a cap rate of 9.19% capitalization rate to the underlying properties.
