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Fortress securitizes $2B Amazon warehouse lease portfolio

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Fortress Investment Group is tapping asset-backed investors to finance $2 billion in mortgage interests for 11 Amazon logistics centers it holds or plans to construct under a leasing partnership with the online retail giant.

According to a presale report issued by S&P Global Ratings Monday, Fortress – a Softbank Group-owned firm with more than $41.7 billion in assets under management – is marketing $2.038 billion in net lease mortgage notes in a first-time series issuance under a new securitization shelf.

CF Hippolyta Issuer LLC Series 2020-1 will market two series of 40-year notes that will be funded from the triple-net lease receivables paid by Amazon for the fulfillment and last-mile delivery centers in 11 states. The original lease terms include 20 years for fullfilment centers and 12 years for the last-mile hubs, and all but one of the properties has up to 25 years of extension options on the leases.

The logistics centers range in value between $18.6 million and $409.4 million, and square footage between 68,000 and 858,000 square feet. But unlike industrial logistics properties that typically carry risk from multiple tenant runoff after lease expirations, the CF Hippolyta portfolio properties are solely occupied by Amazon (Nasdaq: AMZN), which has seen a boom in its income and its share price (now topping $3,000) due to increased demand for product home-delivery services during the COVID-19 pandemic.

S&P’s report states the deal is also strengthened by the triple-net lease agreements that have weighted-average terms of 235 months (or nearly 20 years) are unconditionally guaranteed by Amazon, and require the company to fund all insurance, maintenance, repairs, expenses and taxes for the centers. Amazon is also providing $73 million in a forward-funded account to complete construction of three new centers in Akron, Ohio; Nampa, Idaho; and Stone Mountain, Ga.

S&P issued preliminary AA- ratings of $1.7 billion in Class A-1 and A-2 notes and an A- to $339.7 million in Class B-1 and B-2 notes in the capital stack. S&P has only assumed between 20 and 30 years of lease receivables as part of its ratings analysis.

Goldman Sachs is the sole structuring agent and bookrunner on the deal.

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CMBS Amazon Logistics industry Fortress Investment Group Goldman Sachs