Deutsche Bank and Cantor Fitzgerald have launched another commercial mortgage securitization that relies on a few large, relatively high quality loans to offset the weaker credit quality of the rest of the pool.
The $1.13 billion COMM 2015-CCRE25 is backed by 84 fixed-rate commercial mortgages with a weighted average in-trust loan-to-value, as measured by Kroll Bond Rating Agency (KLTV), of 104.7%. That is above the average of 103.1% for the 24 CMBS conduits rated by Kroll over the last six months, which ranged from 97.5% to 107.5%.
But leverage would have been even higher if not for two loans accounting for 6.7% of the total pool balance that have what Kroll describes as “investment grade characteristics.” Excluding these loans, which have KLTVs of 49.5% and 56.7%, the pool’s weighted average in-trust KLTV is 108.5%.
One of these loans, Pearlridge Center, is secured by 1.1 million square feet of a 1.3 million square foot super regional mall located in Aiea, Hawaii, approximately nine miles northwest of the Honolulu central business district; Kroll considers it to be of AA+’ quality.
The other, Scottsdale Quarter, is a Class-A, 541,971 square foot, mixed-use, open-air lifestyle center and office complex located in Scottsdale, Arizona; Kroll considers it A- material.
However, the property securing these two loans also secures of the balance, also secure one or more “companion” loans not included in the trust. The same is true of the largest loan, the $120.0 million Heartland Industrial Portfolio secured by a portfolio of 22 warehouse/distribution industrial properties, which represents 10.6% of the pool.
Among other risk factors, almost two-thirds of the aggregate transaction balance (41 loans, 65.7%) is comprised of loans that pay only interest and no principal for at least part of their terms.
The loans were contributed by five mortgage loan sellers: German American Capital Corporation (19 loans, 36.4%), Cantor Commercial Real Estate Lending, L.P. (26 loans, 32.3%), Silverpeak Real Estate Finance (11 loans, 12.0%), KeyBank National Association (24 loans, 11.7%) and Ladder Capital Finance LLC (4 loans, 7.6%).
Kroll assigned an AAA’ rating to several tranches of super senior notes benefitting from credit enhancement of 30% and as well as to a single tranche of notes benefitting from just 24% subordination.