Greystone 2021-HC2 is preparing to launch a $450 million collateralized loan obligation (CLO) secured by 27 whole loans on healthcare commercial real estate (CRE).
The underlying property types are concentrated in facilities that assist seniors, according to a pre-sale report from Kroll Bond Rating Agency. Skilled nursing properties make up the majority of the portfolio, with 51.9%, followed by assisted living (16.3%), assisted living and memory care (11.4%), assisted living and skilled nursing (9.2%) and assisted and independent living (7.3%) to round out the top five property subtypes.
J.P. Morgan Securities, Goldman Sachs & Co., Wells Fargo Securities, and UBS Securities are placement agents on the deal, according to KBRA.
Among the transaction’s major structural features is a ramp-up period of 180 days, during which $46.5 million of cash can be used. This comes under the average of 17.6% of cash that can be used among 14 other CRE CLO transactions that KBRA has rated over the last 12 months.
The transaction also has a reinvestment period of 36 months. Any reinvestment assets chosen for the trust must be a healthcare property, and at the time of origination they must be intended for refinance with the proceeds of an agency mortgage loan.
KBRA notes that this type of reinvestment feature can lead to negative credit migration and increased concentration over the term of the securitization, which can be a credit challenge.
KBRA expects to assign ‘AAA’ ratings to the A and A-S classes, which will issue $183.3 million and $15.7 million in notes, respectively. The A class has 59.2% subordination, and the A-S class has 55.7%, KBRA said.
Throughout the rest of the deal, the notes are expected to receive ratings ranging from ‘AA-’ to ‘B-’.
Twenty-six sponsors are behind the Greystone transaction, and the 37 properties have an initial remaining weighted average life of one year. The appraisals loan-to-value on the properties are about 76.1% on a fully funded basis, and the transaction has an issuer debt service coverage ratio of 1.64x, according to KBRA.
A majority of the loans, 92.9%, have extension options that can be exercised provided that certain conditions specified in the loan documents are satisfied.
