Perhaps CMBS issuance has not been where it should be but the latest multibillion multifamily offering from Germany should provide more than enough volume to bring numbers up to speed.

Marketing began for the long-awaited 5.4 billion ($6.87 billion) German multi-family deal, German Residential Asset Note Distributor PLC (GRAND), from Terra Firma's Deutsche Annington Immobilien. According to market data, the GRAND bond sale is almost double the size of the largest CMBS sold in Europe so far this year, and the second largest securitization from Germany to date - second only to the 7.5 billion German postal pensions transaction.

The transaction is structured as a secured loan. A total of 3.2 billion of triple-A rated notes are offered with a 5.6-year average life and a 57.2% equivalent LTV along with five subordinated tranches rated by Moody's Investors Service, Standard & Poor's and Fitch Ratings from Aa2'/'AA'/'AAA' to Baa3'/'BBB-'/'BBB' respectively. The portfolio includes 164,000 residential units, 1,037 million commercial and 38,000 parking units. The class C notes will be issued with an amount of 869 million at closing.

Further, class C notes of 133 million will remain with the issuer as Treasury notes pending a later sale after certain conditions are met. The proceeds of this additional issuance will be used to redeem the class E notes, effectively transferring the amount outstanding under the class E notes (rated BBB' at day 1) into class C notes (rated A' at day 1). The total amount outstanding under all classes of notes will remain unchanged.

According to S&P, the transaction was arranged to restructure a part of the existing debt of the borrower group. Since the acquisition, the group underwent the reorganization of most of the portfolio into 24 newly established German limited partnerships. The remaining five borrowing entities are companies with a prior operating history.

Deutsche Annington is 80% owned by Japanese bank Nomura, and British financier Guy Hands' Terra Firma Capital Partners manages that stake for Nomura. Barclays Capital and Citigroup Global Markets are the arrangers. The group commenced operation in Germany in 2001, with the purchase of approximately 64,000 residential units. Since then, further portfolios have been acquired, with the most notable transaction being the purchase of Viterra (137,783 residential units), in 2005.

(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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