Bank of America Merrill Lynch priced a German multifamily CMBS, Taurus 2013 (GMF 1) plc, on Thursday, demonstrating some signs of life in a market that has seen little placed activity since 2007.
Investors oversubscribed the deal's class A, B, C and D notes. The €710 million, class A, triple-A notes with an average life maturity of 4.90-years priced at 105 basis points over the three-month Euribor according to a Deutsche Bank report.
The €130 million, 4.90-year, double-A class B notes priced at 150 basis points; the €120 million single-A Class C notes with an average life maturity of 4.90-years priced at 200 basis points; and the class D and E notes both rated triple-B with and average life maturity of 4.90-years priced at 275 basis points and 350 basis points respectively.
Both Fitch Ratings and Standard & Poor's rated the deal.
“The pricing of Taurus GMF CMBS set up a new benchmark for the sector and reflected the strong appetite for paper in the absence of traditional RMBS support," analysts at BofAML said in a report published Friday. “We believe it was strongly influenced by the entry of first time investors in the sector and by the lack of RMBS paper driving the traditional RMBS investor base into a sector which resembles, although it is not quite like, RMBS.”
S&P noted in a report, also published on Friday, that the debt service coverage ratio for the notes ranged from 2 times for the €710 million class A notes to 35 times for the €95 million class D notes. “Pricing settled at the tight end of final guidance [and] significantly tighter than the last German multifamily CMBS deal, Florentia 2012-1 issued in Sept,” said analysts.
U.K. investors bought 65% of the deal, with Dutch investors taking 16%. Fund managers accounted for the highest share of investors (42%), ahead of banks (27%).
The deal is secured by a portfolio of 37,000 plus residential units and 8,000 plus commercial units and car spaces. HSBC is co-lead manager on the deal with BofAML.
The return of European CMBS issuance isn’t likely to benefit the vast majority of legacy commercial real estate loans, which will continue to face refinancing and repayment challenges, according to research S&P published in April. "These newly issued transactions mainly concentrate on loans that have low leverage levels, strong underlying assets, and granular cash flows,” said S&P credit analyst James Belchamber . “A large proportion of these transactions have also been backed by single sponsors."
