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Bronx apartments portfolio takes lead role in new $1.2B Morgan Stanley CMBS

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Morgan Stanley will market bonds backed by a commercial-mortgage portfolio with a large exposure to office properties as well as high concentrations in lodging and retail — the latter pair being the more volatile and challenging property types in CMBS conduit pools.

The pool also is the second deal this month to include a portfolio of Bronx multifamily apartment buildings as its largest loan in the collateral pool.

The $1.02 billion BANK 2020-BNK26 transaction includes 75 commercial mortgage loans with a principal balance of $1.2 billion. The loans are secured by fee and leasehold interests in 101 properties in 22 states.

The largest concentration of loans is in New York (28 properties, or 26.6% of pool balance), Washington (four properties, 9.8%) and Florida (eight properties, 8.6%).

The leading types include 35% backed by office properties, 20.9% in retail, 19.9% lodging and 16.1% multifamily.

In a presale report, Fitch Ratings stated that the nearly one-fifth of the pool tied to hospitality and hotel properties is well above the 2019 average of 12% for 2019 conduit deals rated by Fitch.

S&P Global Ratings noted the “strong concentration” of properties in primary markets (66.6% of pool) including New York, Seattle and San Francisco.

The largest exposure in the pool is from New York-based Finkelstein Timberger East Real Estate. The real estate firm has two loans in the pool, including the single largest in the transaction: a $76.7 million loan for a portfolio of eight rent-stabilized multifamily properties in the West Bronx submarket.

The capital stack of the transaction includes five classes of senior notes with preliminary AAA ratings from DBRS Morningstar, S&P and Fitch.

Morgan Stanley, Bank of America, Wells and National Cooperative Bank originated all the loans.

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