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Citigroup, JP Morgan Prep $1.8B Medical Office CMBS

Citigroup and JP Morgan are in the market with $1.8 billion securitization of a loan taken out by Northstar Realty Finance to fund its acquisition of Griffin American Healthcare REIT II.

The loan originators behind GAHR Commercial Mortgage Trust 2015-NRF are Citigroup Global Markets Realty, JPMorgan Chase Bank, Barclays Bank, and Column Financial.

Fitch said the securitized loan has a ratio of debt service coverage ratio — the cash flow available to cover payments — of 0.96 times and a loan-to-value ratio of 97.3%.

The deal is ultimately backed by mortgages and leases on 215 medical office and healthcare-related properties covering a total area of 10.5 million square feet.

The underlying portfolio consists of 142 medical office buildings; 59 healthcare properties NNN-leased to third party operators – where the tenant is entirely responsible for the upkeep and taxes of the leased property — and 14 healthcare properties subject to operating leases. The healthcare properties are a mix of independent living facilities, skilled nursing facilities, senior housing, and long-term acute care hospitals.

The trust will issue a mix of both floating- and fixed-rate tranches and have ratings as high as ‘AAA’ and low as ‘B-’, well into junk debt territory. The largest senior tranche is a $444.7 million A-FL1 piece rated ‘AAA,’ with a 60.4% credit enhancement and a floating-rate return. Fixed-rate tranches include a $321.4-million, ‘AA’-rated piece and a $215.5-million ‘BB-’ piece.

NorthStar Realty Finance Corp. will use the proceeds as well as an additional $1.3 billion in equity to buy up the properties linked to its acquisition of Griffin American Healthcare REIT II.

In Fitch’s view, the portfolio is well diversified, with the underlying properties spread across 31 states and no individual state accounting for over 10% of the total appraised value.

NorthStar Realty Finance Corp. had $14.2 billion of assets as of June 30, 2014.

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