As companies are tying up loose strings to close out third quarter books, Canadian institutions have begun filling up the fourth quarter commercial mortgage-backed securities pipeline. With at least three deals being brought to market, it appears Canada will have an active quarter.
First up, Merrill Lynch Mortgage Loans Inc. priced a C$115.5 million issue last week. The semi-structured securitization of the Bell Mobility headquarters is fully amortizing, having an average life of 14 years. Pricing was 156 basis points over the Government of Canada (GOC) 10.25% 14-year benchmark.
Expected to price Oct. 11 is a C$189.5 million offering from Solar Trust. TD Securities will serve as lead manager of the commercial mortgage pass-through certificates, with CIBC World Markets and Royal Bank of Canada-Dominion Securities co-managing the transaction. Retail is the major component of the 16 properties in the transaction. Two properties are each in Alberta and Quebec, while the remaining 12 properties are located in Ontario. RioCan REIT has a beneficial interest in all 16 properties: 100% beneficial interest on 12 properties, and either a 50% interest or the right to acquire 50% of the other four properties.
Market sources discussed the preliminary size of the five-year triple-A rated tranche as an expected $39 million to $41 million, with a targeted spread of 68 over the GOC 8.75% five-year benchmark. The 10-year triple-A tranche will be between $82 million and $95 million with a targeted spread of 95 over the GOC 5.50% 10-year benchmark.
TD Securities is also serving as lead on the $110 million single-tranche mortgage bond for the Bramalea City Centre, a shopping mall. The deal is expected to close in about three weeks, and price talk on the transaction is 180 basis points over the GOC five-year.
"There's a fair amount of product, given the fact that the industry is so young, but at the same time, are the amounts within reason and doable? Yeah, I think that's a safe statement to make," said an ABS trader following the transactions.