Deutsche Bank and Cantor Fitzgerald plan to issue $1 billion of securities backed by commercial mortgage loans via COMM Series 2016-CCRE28.
The collateral pool is comprised of 49 fixed rate loans secured by 119 commercial properties.
Moody’s Investors Service and Fitch Rating assigned preliminary ratings to the deal. The trust will issue super-senior ‘AAA’ /‘Aaa’-rated classes at 30% credit enhancement and a subordinate ‘’AAA’/’Aa2’ rated class A-M with 26.125% credit enhancement.
The top ten loans in the pool have strong credit profile and are located in the top tier US commercial real estate markets of Los Angeles (22.4%), New York (9.8%), San Francisco (4.7%), Boston (3.5%), Chicago (1.1%), and Washington D.C. (1.1%).
By contrast, only 12.4% of the loans in the collateral pool are secured by properties located in small markets. Most conduit pools issued in 2015 exhibited higher small market share in low to mid-twenties, according to a Moody’s Investors Service presale report.
“Properties situated in major markets tend to exhibit more cash flow and capitalization rate stability over time compared to assets located in smaller or tertiary markets,” explained Moody’s.
Four of the eleven largest loans are secured by multiple properties. The Santa Monica Multifamily Portfolio Loan (6.1% of the pool balance) is secured by a portfolio of 11 low-income multifamily assets located in close proximity to one another in Santa Monica, CA. The AG Life Time Fitness Portfolio Loan (5.8%) is secured by a portfolio of 10 single-tenant health clubs, all with the Life Time Fitness flag. The Harvey Building Products Portfolio Loan (3.4%) is secured by 30 single-tenant industrial assets primarily located in the greater-Boston metro area.
Despite 42.6% of the collateral located in top real estate markets, the pool has a stressed LTV of 113.8%, which is above the average LTV for pools rated by Fitch over the last two years. A significant portion of the loans (40%) pay only interest, including seven of the top ten loans. This is higher than the average for other Fitch-rated US multi-borrower deals of 20.1% in 2014 and 23.3% in 2015.