Colony Mortgage, a real estate investment trust that specializes in “transitional,” or improving property, is preparing its third securitization, according to Moody’s Investors Service.

The deal, Colony Mortgage Capital 2015-FL3, is structured as a collateralized loan obligation, rather than as a conduit. It is backed by $477.7 million in whole loans and senior participations.

Among the deal’s strengths, according to Moody’s, is that the initial pool consists of various core commercial real estate property types from various geographic regions.

However, there is low diversity in the number of obligors, and all of the collateral is credit assessed and not publicly rated. Also, by its nature, the pool consists of highly leveraged collateral, the majority of which is credit assessed below investment grade.

Three senior participations have a related future funding commitment totaling $18.7 million, or 3.9% of the collateral pool. Even though the future funding commitment will be represented by one or more pari-passu participations, which will not be acquired by the Issuer, the potential concentration risk has been accounted for in Moody’s analysis.

The portfolio has an average contributed debt Moody’s LTV of 127.1%.

The largest loan in the pool, at 11% of the balance, is secured by two separate office properties located at the intersection of East 9th Street and St Clair Avenue NE in downtown Cleveland, Ohio. The loan pays only interest, and no principal, for its entire term and has an LTV, as calculated by Moody’s, of 118%. One third of the total space is vacant. Moreover, the portfolio’s largest tenant, Penton Media, recently emerged from bankruptcy.

Keybank National Association will act as the servicer, and Colony AMC OPCO LLC will act as special servicer for this transaction.

J.P. Morgan Securities and Morgan Stanley are the deal’s structurers.

Moody’s assigned an ‘AAA’ to the $258.0 million tranche of senior class A notes, which benefit from 46% subordination and have an assumed spread of one-month Libor plus 180 basis points. The remaining notes to be issued by the trust are unrated and have an assumed spread of one-month Libor plus 450 basis points.

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