Citigroup and Wells Fargo are marketing $1.1 billion of commercial mortgage bonds with heavy exposure to retail property, according to a presale report published by Kroll Bond Ratings Agency.
The transaction, called Citigroup Commercial Mortgage Trust 2015-P1 (CGCMT 2015-P1), offers five tranches of tripled-A rated class A notes, totaling $691.5 million, that benefit from 30% credit enhancment.
The deal also includes five subordinate tranches: $58.9 million of class B notes assigned a preliminary AA’ rating, $52 million of class B notes rated A-,’ $56.2 million of BBB- rated class C notes, $23.3 million of class D notes rated BB,’ and $11 million of class F notes assigned a BB- rating.
The class B, C, D, E, and F notes benefit from 18.125%, 13.475%, 8.25%, 6.125%, and 5.125% credit enhancement, respectively.
All of the notes reach final maturity in September 2048.
Deutsche Bank and Drexel Hamilton are serving as co-managers on the deal.
CGCMT 2015-P1 is backed by 45 loans secured by a pool of 146 commercial properties. Loans is in the pool have a weighted average (WA) life of 9.3 years and principal balances ranging from $1.2 million to $100 million. The deal is most heavily exposed to retail properties (29%), lodging facilities (21.4%), and office buildings (13.7%), with the highest concentration of properties in California (241.1%), Florida (21.5%), and New York (9.5%).
The overall pool has a Kroll-adjusted WA KLTV ratio of 101.4%, which is lower than the average (103.9%) of the last 22 CMBS conduits rated by Kroll over the past six months. However, the latest transaction’s KLTV is skewed by five loans with KLTV ratios ranging from 38.9% to 73%. Without taking these loans into consideration, the pool has a high WA KLTV ratio of 109.6%.
Kroll also notes that 48.7% of the pool is exposed to primary markets, which tend to withstand fluctuations in the economy better than secondary and tertiary markets. This exposure is just slightly higher than the average primary market exposure (47.1%) for CMBS deals Kroll rated over the past six months.
According to Kroll, the pool’s exposure to lodging facilities (21.4%) is higher than the average of (15.3%) for deals rated over the past six months. High exposure to lodging is considered to be a weakness of the transaction, as such properties tend to be volatile because they depend of nightly room rates.
On the other hand, the pool has the lowest single tenant exposure (0.8%) than any CMBS deals rated by Kroll over the past six months, which averaged 9.4%. Properties with multiple tenants tend to be less risky than properties with cash flow from only a single lessee.
The deal is expected to price next week and close on August 19.
