The CMBS pipeline cleared four deals this week ahead of the ABS Vegas industry conference, which kicks off this Sunday.
On the single-asset, single-borrower side, issuers priced a $1.3 billion securitization of a loan secured by the ground beneath the Saks Fifth Avnue's 650,000-square-foot flagship store in midtown Manhattan.
Standard & Poor’s rated the deal, called SFAVE 2015-FAVE. The trust sold AAA’ rated class A1 notes at swaps plus 141 basis points; and the class A2-B notes were priced at swaps plus 168 basis points.
The loan backing the deal has a 20-year term and is based on an independent appraiser’s assessment of the property’s value at $3.7 billion. Hudson’s Bay Co. of Toronto bought the Saks Fifth Avenue chain in 2013 for $2.9 billion. The loan pays only interest for its entire 20-year term and was underwritten by Bank of America, N.A., Morgan Stanley Bank, N.A., Goldman Sachs Mortgage Co. and Bank of Nova Scotia, in December last year.
Although the Saks Fifth Avenue is not collateral for the loan (only the land and the lease on the land secure the loan), S&P still considered the income-generating capability of the building in its rating. That is because the building generates the income from which the ground lease is paid; which in turn pays the loan that pays the bonds.
Deutsche Bank this week also priced a $308 million CMBS that is backed by a loan the bank underwrote to private equity giant The Blackstone Group to purchase 1740 Broadway, an office building in midtown Manhattan.
The 10-year AAA’ rated class A notes were sold at swaps plus 100 basis points. DBRS rated the deal called BWAY 2015-1740 Mortgage Trust.
Blackstone purchased the building for $605.0 million from Vornado Realty Trust and, according to the appraisal, it has a dark value (which includes valuation with the possibility of the property being vacant) of $400.0 million, which is 129.9% of the loan amount. However Blackstone has the opportunity to create additional value by leasing up approximately 6,914 square feet of soon-to-be-available ground floor retail in the coming years. The firm anticipates retail demand in the immediate area, helped by the presence of the nearby Nordstrom flagship store that is currently under development and is slated to open in 2017.
L Brands, the parent company that owns national chain stores Victoria's Secret and Bath and Body Works, is the largest tenant in the building, which occupies the whole block along Broadway between West 55th and West 56th streets, according to DBRS. L Brands has been at the building since 2006. Its leases all expire in March 2022, two years prior to loan maturity, but contain one five-year renewal option. The property has averaged a 6.0% vacancy rate over the past 20 years, and as of October 31, 2014, was 98.3% leased by five tenants, according to the presale report.
JP Morgan and Barclays priced $836.5 million of securities via the conduit deal JPMBB 2015-C27. The trust's 10-year, triple-A rated super senior notes pay 90 basis points over interpolated swaps. That's four basis points tighter than the spread on 10-year notes sold from Wells Fargo’s $841 million WFCM 2015-C26, earlier in the week.
Both conduits priced tighter than the 10-year triple-A notes CGCMT 2015- CG27, which priced at swaps plus 97 basis points and was the last conduit to price in January.
JP Morgan’s deal securitizes 44 loans that are secured by 91 properties. The collateral pool will include loans originated by JP Morgan, Barclays, Starwood Mortgage Funding II, Redwood Commercial Mortgage Corporation and RAIT Funding, LLC. The majority of the loans were used to refinance existing debt (29 loans, 59.4%). The proceeds from the remaining loans were used for property acquisitions (15 loans, 40.6%).
Kroll Bond Ratings Agency said in a presale report that the share of loans with loan-to-value (LTV) ratios higher than 100% is 66.4%, higher than the average of 64.5% for CMBS conduits rated by KBRA over the past six months (10 loans have LTVs that exceed 105%). However the weighted average LTV for the pool is 101%, in line with deals that the agency recently rated. Morningstar is also rating the deal.
New York City properties feature heavily, representing more than 15% of the pool. The loan secured by New York City based office/retail property The Club Row Building is the largest in the pool. The building is located on West 44th Street in the Grand Central submarket of New York City. The loan secured by Branson on Fifth is the third largest in the pool. The property is a 31-unit (44,250 sf), 10-story mid-rise multifamily and 14,881 square foot retail complex. It is situated on West 55th Street at Fifth Avenue in the Midtown West neighborhood of New York.
Most of the loans have 10-year terms; five loans have five-year terms and one loan has a fifteen-year term. More than half of the loans pay only interest for a portion of their term or for their entire term; 22 loans, make principal payments throughout their respective terms.
Wells Fargo's deal is backed by 100 fixed rate loans secured on 116 properties and underwritten by Liberty Island Group, Rialto, C-III Commerical Mortgage, Silverpeal Real Estate Finance, Basis Real Estate Capital II, National Cooperative bank, Walker & Dunlop and Wells Fargo.
The largest loan in the pool, Chateau on the Lake (4.8%) is a 301-key full-service hotel located in Branson, Missouri. The top five loans, also include Trails at Dominion (4.2%), JW Marriott New Orleans (4.1%), Broadcom Building (3.7%), and Aloft Houston by the Galleria (3.4%), represent 20.3% of the initial pool balance. The pool has a weighted average loan-to-value ratio of 99.8%, lower than the 119.4% LTV of the MSBAM 2015-C20 conduit, the first deal to price in 2015.
