Bridge Investment Group is the lender to tap the securitization market to finance commercial mortgages on properties being rehabbed or converted to a new use.
The privately held real estate investment and property management firm has $8.5 billion in assets under management in its investment advisory group.
The $510.2 million transaction, BDS 2018-FL1, is a commercial real estate collateralized loan obligation (CRE-CLO). It will initially be collateralized by 27 loans secured by 31 properties that were originated by ROC Debt Strategies Fund II REIT. The bulk of the properties being financed are either multifamily (47%) or office buildings (42.1%).
The loans were originated between November 2016 and December 2017, with the majority (18 loans, 69.2%) originated between June and December 2017.
Like many CRE-CLOs, the transaction permits the acquisition of companion loan participations related to the initial collateral for an approximately three-year period post-closing, and dispose loans at par under certain circumstances.
None of the assets have existing subordinate debt, including mezzanine financing, and only one asset (2% of the pool balance) can incur mezzanine debt in the future.
Both Kroll Bond Rating Agency and Moody’s Investors Service consider the collateral to be highly leveraged. Kroll puts the weighted average in-trust loan-to-value ratio at 135%, higher than any of the 11 prior CRE CLO transactions it has rated in the last 12 months.
Moody’s puts the LTV at 129.1%.
Among risks to the deal, according to Kroll, there are two loans (6.4% of the pool) located in New York City that were completely unoccupied based on the latest available occupancy figures. The larger of the two is 815 Broadway (10th largest, 3.9%), a five-story, 52,359-square-foot office building located in the Bushwick section of Brooklyn. The other is 355 West Broadway (2.4%), a five-story, mixed-use property that includes office suites on its upper floors and street-level retail; it is in Manhattan’s SoHo area. Both properties have undergone significant alterations and have recently reached substantial completion.
Bridge operates across four main business lines: multifamily, office, senior housing and CRE securities. Through its operating units Bridge owns and/or operates over 27,600 multifamily units, over 6.0 million square feet of office space and approximately 7,100 senior housing units. The firm holds investments in first-mortgage floating-rate loans, Freddie Mac K-Series “B-Pieces,” mezzanine loans and other select opportunities primarily secured by multifamily, office and seniors housing assets located in the U.S.