Cantor Fitzgerald Real Estate and Société Générale are securitizing a retail-centric, $787.5 million commercial real estate pool that includes 45 first-lien mortgages on 120 multifamily and commercial properties.
CVCRE 2016-6 consists of four super-senior class A notes tranches with a preliminary triple-A rating structured finance rating from Morningstar and Fitch Ratings. The notes have 30% credit enhancement. The Class A-1 notes are sized at $30.9 million; the Class A-2B notes at $33.2 million; the Class A-2 notes at $220 million and the Class A-3 notes at $267.1 million.
The deal also includes a subordinate Class A-M structure with $59 million in notes (also rated ‘AAA’); as well as a Class B tranche of notes at 439.3 million and a Class C notes offering at $37.4 million. The B notes are rated ‘AA+’ with a 17.5% CE, and the C notes are $37.4 million and rated ‘A’ with a 12.75% credit support level.
According to Fitch, the deal has below-market leverage ratings compared to other recent fixed-rate multiborrower CMBS transactions, but the pool also contained a larger number of interest-only loans that comprise 48% of the principal balance of the loans, and is only scheduled to amortize 8.9% (compared to 11.7% for 2015 deals and 10.3% for 2016 deals year-to-date).
The top 10 loans represent 56.6% of the pool, led by a $71 million loan for the Hill7 Office in Seattle, Wash. The Pugent Sound region building was recently sold to a real estate investment trust that involved a $101 million loan, of which a portion has been sliced into the CFCRE 2016-6 portfolio. The loan comprises 9% of the pool.
Other major loans in the collateral include a $70 million loan portion of a $425 million mortgage that refinanced the Vertex Pharmaceuticals headquarters building in Newton, Mass., and another $70 million mortgage slice of a $291 million mortgage provided to refinance an existing loan for the Potomac Mills mall owned by Simon Property Group in Woodbridge, Va. Both loans have investment-grade opinions benefiting the asset-backed pool, noted Fitch.
The pool is also concentrated with 13 loans (48.2% of the collateral balance) having pari passu borrowings outside of the transaction. Another concentration risk factor is the presence of 31 retail properties in the collateral, comprising 47.6% of the poool.
But Fitch noted the loans in the pool are producing a higher weighted average leverage (103.6% loan-to-value) and above-average debt-to-service coverage (1.19x) compared to other recent vintage CMBS securitizations.
The deal carries a weighted average coupon of 4.26%.
Morningstar and Fitch differed on their rated net cash flow variances from the issuer's underwritten projection of $83.1 million per year from the loans. While Morningstar (which examined 23 of the loans representing 82.9% of the cutoff portfolio balance) assigned annual cash flow of $80.3 million - a 5.5% reduction - Fitch projected only $72.6 million, a 12.63% haircut.
