Deutsche Bank and Cantor Fitzgerald have teamed up for a $1.2 billion securitization of 68 commercial mortgage loans secured by 86 properties, according to a presale report published by Kroll Bond Rating Agency.
The fixed-rate commercial loans for the deal, COMM 2014-CCRE19, have principal balances ranging from $2.0 million to $77.5 million, and are secured by the borrowers’ interest in the 86 properties. The majority of the loans will be used to refinance existing debt.
Kroll assigned preliminary AAA’ ratings to seven tranches of notes to be issued by the trust, including the $69.93 million class A-1 notes, the $168.68 million class A-2 notes, the $15.82 million A-3 notes, the $94.34 million A-SB notes, the $190 million class A-4 notes, and the $283.14 million A-5 notes—all benefiting from a credit enhancement of 30.0%. The $89.53 million class A-M notes also received AAA’ provisional ratings and benefit from a credit enhancement of 23.375%.
Among the deal’s strengths, according to Kroll, is the geographic diversity of the underlying properties—they are located in 28 states. The two states with the largest concentrations of the pool balance are California (19.6%) and New York (13.2%).
The diversity of property types is also a strong point in the transaction. Office (26.6%), lodging (20.8%), multifamily (17.2%), retail (16%), and mixed use (9%) comprise the majority of the assets.
However, the pool’s primary market exposure of 36.0% is lower than the average of the last 16 CMBS conduits Kroll rated. Primary markets have diverse economies and favorable demographics than can better withstand fluctuations and downturns in the national economy (compared with tertiary markets).
Also viewed as a weakness by Kroll, the pool has exposure to 41 high leverage loans with loan to value ratios, as calculated by the rating agency, in excess of 100%. That’s higher than the average of the 16 CMBS deals Kroll has rated in the last six months. Higher leverage implies lower borrower equity levels, greater default probability, and higher overall loss severity should a default occur.
Deutsche Bank and Cantor most recently priced an $863 million securitization of 49 commercial mortgage loans secured by 60 properties in late June—COMM 2014-CCRE18. Fitch Ratings, DBRS and Standard & Poor’s gave triple-A ratings to all six tranches of class A notes.
