Goldman Sachs plans to securitize a portion of a $650 million commercial mortgage loan that is secured by the IBM Building located on 590 Madison Avenue between 56th and 57th Streets in New York City, according to Kroll Bond Rating Agency.
GSMS 2015-590M collateral consists of a $119.4 million senior A note and a $280.6 million subordinate B note. The remaining portion of the whole mortgage loan, which is not trust collateral, consists of two senior A notes totaling $250.0 million. The non-trust A notes are expected to be securitized in one or more future CMBS conduit transactions.
The collateral for the loan also includes a 78-space underground parking garage, a 15,000 square foot glass-enclosed atrium and the leased fee interest in portion of the land located under a Niketown store that is located adjacent to the subject.
Although the loan pays only interest, and no principal, for its entire 10-year term, the pool benefits from moderate in-trust leverage, which reduces the likelihood of default, and provides a buffer against potential losses, according to Kroll. The loan-to-value as measured by Kroll is 79.0%; it is even lower, 45.2%, when based on the appraiser value of the loan collateral.
"It is important to note interest only (IO) loans which do not provide amortization, are not, in and of themselves, less credit worthy than amortizing loans," Kroll stated in its presale report. "An IO loan that has relatively lower beginning and ending leverage levels than an amortizing loan may be more favorable from a credit standpoint."
As of August 2015, the property was 77.9% leased to 45 tenants, the three largest of which, IBM, Crowell & Moring, and Aspen Insurnce, account for 32.8% of total base rent. .
The transaction is exposed to lease rollover risk. During the 10-year loan term, leases accounting for 86.6% of the occupied square footage and 83.5% of base rent are scheduled to expire. There are two years, 2024 and 2025, when the annual scheduled rollover at the subject exceeds 15% of the total base rent.
The largest tenant rolling in 2024 is Crowell & Moring, which accounts for 9.7% of the total square footage and 14.4% of total base rent.
The largest tenant rolling in 2025 is IBM, which accounts for 11.7% of the total square footage and 11.3% of total base rent. The second largest tenant rolling in 2025 is Bonhams (5th largest tenant),which accounts for 4.0% of the total square footage and 5.7% of total base rent.
The collateral property was acquired by The Board of the State Teachers Retirement System of Ohio (STRS Ohio) in August 1994 from IBM. STRS Ohio is a US public pension fund that serves approximately 498,000 active, inactive and retired Ohio public educators. As of August 31, 2015 the company had a real estate portfolio valued at approximately $7.7 billion and total investment portfolio of approximately $71.3 billion.
Kroll assigned a preliminary 'AA' rating to the class A notes. 'AA-' to the class B notes; 'A-' to the class C notes; 'BBB-' to the class D notes; and 'BB' to the class E notes.
Part of the proceeds from the $650.0 million mortgage loan were used to defease a $350.0 million first mortgage loan that was securitized in the GCCFC 2007-GG9 CMBS securitization. According to information from Trepp, the loan remained current throughout its term.