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GM Building shows up in yet another CMBS

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Bank of America Merrill Lynch is banking on high-revenue, low-leveraged commercial properties to offset the concentration of non-controlling pari passu loans pooled in a new $933.3 million conduit commercial mortgage securitizaton.

BANK 2017-BNK6 is a CMBS transaction of 72 fixed-rate loans covering 189 properties, highlighted by the iconic General Motors Building in Midtown Manhattan’s Plaza District.

According to presale reports published Monday, the five-largest loans in the transaction totaling $312.2 million and representing 33.5% of the collateral pool are each portions of much-larger whole loans that were syndicated out to multiple asset-backed transactions.

The largest mortgage, a $90 million GM Building interest-only loan accounting for 9.6% of the collateral pool, is only 6.1% of a $1.47 billion whole loan taken to refinance existing debt in June and pay a dividend to its joint venture sponsors (including lead sponsor Boston Partners).

Fitch Ratings, DBRS and S&P Global Ratings each assigned preliminary AAA ratings to five classes of fixed-rate senior notes, totaling $312.2 million.

The bulk of the whole loan for the GM Building on 767 Fifth Avenue had been previously assigned to BXP 2017-GM, a single-property transaction issued in June that purchased a $725 million slice of the loan from Morgan, Wells, Citigroup and Great American Capital Corp. In addition to the senior loan, the borrowers — a joint venture led by affiliates of the Boston Properties real estate investment trust — have also issued $830 million in subordinate Class B notes to fund the refinancing as well as provide a $652.9 million cash-out equity return.

Overall, eight loans representing 43.1% of the pool have pari passu debt, according to DBRS.

Another non-controlling loan asset is the trust’s $60.9 million portion of a $353 million loan (along with $170 million in subordinate secured borrowings) to Gateway Net Lease Portfolio, involving 5.3 million square feet of 41 office and industrial properties controlled by private equity real estate firm Elm Tree funds. The properties are generally rented to investment-grade and other “high-credit-quality” tenants on a long term basis, including FedEx, BAE Systems, GE Aviation and Cardinal Health.

According to DBRS, none of the loans had a debt service coverage ratio below 1.15x, and the three largest loans in the pool (GM, Gateway and the Simon Property-owned Del Amo Fashion Center in Torrance, Calif.) have “shadow ratings” characteristics of investment-grade borrowers. Another plus: only 8.9% of the transaction balance carries the added risk of being secured by properties primarily or fully leased to a single tenant.

According to Fitch, the pool’s leverage is lower than other multiborrower transactions it has rated this year, with a Fitch-derived 1.61x DSCR and a loan-to-value ratio of just 93.2% — “significantly better” than 2017 year-to-date CMBS deal overage of 1.23x DSCR and 102.9% LTV.

The pool’s weighted average mortgage coupon of 4.18% is also “well below historical averages,” Fitch reported.

Bank of America, as retaining sponsor, will hold an "eligible vertical interest” in a single class of risk-retention interest certificates. The loans were originated and sold off into the trust from Bank of America (serving as depositor, as well), Wells Fargo, Morgan Stanley and the National Cooperative Bank.

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