A new trust pool of 42 loans sold to a Deutsche Bank-affiliated trust is pursuing a daily double of high-risk collateral attributes: a bevy of underlying interest-only loans and a concentration in the more volatile office and hotel sectors.
COMM 2016-COR1 Mortgage Trust is a securitization of fixed-rate CMBS loans with a principal balance of $890.7 million, sold by Jefferies LoanCore LLC and German American Capital Corp. to depositor Deutsche Mortgage & Asset Receiving Corp. The loans are being serviced by Midland Loan Services, a division of PNC Bank.
Twenty classes of notes will be issued, with 12 receiving principal & interest, six for interest-only receivables, one class receiving excess interest, and a subordinate class of bonds for residual interest payments.
Kroll Bond Rating Agency, Fitch Ratings and Moody’s Investors Service have assigned provisional triple-A ratings to five super senior and one senior class of notes totaling $676.9 million, following the creation of a capital stack that supports the first-priority certificates' 30% credit enhancement.
The 42 loans are secured by 50 commercial properties of largely strong real estate quality and diverse market composition, according to ratings agency reports, albeit with a collective higher weighted average loan-to-value ratio of 117.3%.
An unusual feature is the high concentration of full-term interest-only loans (15), including four of the five largest loans in the collateral. At 51.8% of the pool size, the volume share of non-amortizing loans are “significantly” higher than the average full-term I/O loans in conduit transactions rated by Moody’s in 2015 (23.3%) and year-to-date in 2016 (31%).
The concentration of office and hotel properties in the collateral represents 37.4% of the pool balance, another area where COMM 2016-COR1 tops the average for CMBS pools issued during 2015 (25.7%) and 2016 (26.5%).
In addition, the pool has five loans that have subordinate B-note mezzanine debt, including an $82 million, 4.49% fixed-rate loan to the Glendale (Calif.) Fashion Center, a 263,882 square-foot anchored retail center near Los Angeles. Glendale is largest loan included in the deal at 9.2% of the pool balance. The Glendale Fashion Center debt in the pool is encumbered with $4 million of mezzanine financing outside the trust, which Moody’s used to adjust the shopping center loan’s LTV to 133.6%.
The deal’s cumulative debt service coverage ratio is 171% and the debt yield available to the trust is 8.6%.