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Credit Suisse's next conduit has heavy exposure to single-tenant properties

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Credit Suisse is marketing $855.3 million of commercial mortgage bonds with heavy exposure to single-tenant properties, most notably a $78 million whole-loan mortgage loan for the first phase of State Mutual Automobile Insurance Co.’s Atlanta-region operations expansion.

CSAIL 2017-CX10 Commercial Mortgage Trust is a backed by a total of 31 loans secured by 76 properties owned by 26 sponsors.

Six of the loans are single-tenant properties, making up 27.2% of the pool, which is above the average for conduits that Kroll Bond Rating Agency has rated. The largest loan is for the first phase of State Farm’s two-year-old Park Center Phase 1 office tower complex that the firm constructed in Dunwoody, Ga. The loan is a low-leverage loan and is funding a sale-leaseback arrangement on the 590,926-square-foot property, of which State Farm occupies 96.5% of the rentable space on a 20-year, triple-net lease.

The second-largest loan is for a portfolio of 12 single-tenant, mixed-use properties in nine states owned by the real estate investment trust Global Net Lease Inc. (NYSE: GNL). The GNL Portfolio loan is part of a $187 million first mortgage refinancing underwritten by Column Financial and Citigroup. The properties include six industrial, four office and two mixed-use properties with an average age of 17 years. Among the tenants are FedEx, Sandoz , Inc., GE Aviation and Merck & Co.

All of the loans were originated by Credit Suisse, Column Financial, Benefit Street Partners and Natixis will be the retaining sponsors and hold a 4.09% eligible vertical interest in the notes for risk-retention purposes.

Kroll puts in-trust loan-to-value ratio at 81.8%, which is lower than the average for 19 conduits it has rated this year. S. To come up with this figure, the rating agency gave discounted Credit Suisse's estimate for net cash flow by 5.7%.

The pool is most heavily concentrated in office properties (42.4%), followed by multifamliy (14.7%), and lodging (14.6%).

Seven of the loans, or 20.9% of the pool, have amortize during their terms but still repay the bulk of principal in a final, balloon payment; another 18 loans or 68.1% of the pool, pay only interest and no principal, for their entire terms. A large percentage (65.1%) of the loans are secured by property encumbered by other debt with an equal, or pari passu, claim.

Only four properties totaling just over 3% of the pool are in areas affected by recent hurricanes.

Eighteen classes of notes will be issued in the transaction, of which three pay only interest and one receives only whatever interest is left over after paying interest on the other notes.

The super senior class A notes (30% of the pool) and junior A notes (19.1%) have received preliminary triple-A ratings from Kroll, S&P Global Ratings and Fitch Ratings; they are supported by 30% credit enhancement.

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