Harvest Commercial Capital is preparing to sponsor $218.5 million in commercial mortgage-backed securities (CMBS) through a series of class A and several class M notes in the Harvest Commercial Capital Loan Trust, series 2024-1.
A pool is composed of small-balance commercial mortgages set at fixed, fixed reset and adjustable rates that Harvest originated, according to DBRS Morningstar. The pool includes loans originated under section 504 of the Small Business Investment Act of 1958, which supported funding for loans made to small business concerns, predominantly with original 30-year terms, and secured by first liens on commercial real estate (CRE). Businesses with a tangible net worth under $15 million, according to the rating agency.
The SBA loans account for 69 out of a 114-loan pool, the rating agency said.
Initially, the mortgage pool has an initial aggregate stated principal balance of $174.8 million, DBRS analysts said. Proceeds from the loans can either purchase a building, fund construction, renovations or expansions and under limited circumstances, refinance loans.
Mizuho Securities and Robert W. Baird are initial note purchasers and underwriters.
The deal will issue notes through a capital structure of seven tranches of senior and subordinate notes, DBRS analysts said. That also accounts for one type of credit enhancement on the deal, while the other is excess spread. The structure and credit enhancements provide enough to support cumulative net loss (CNL) rate assumptions of 30.8%, 22.5%, 16.5%, 12.6%, 8.9% and 6.0%, respectively, to the AAA, AA, A, BBB, BB and B rating categories.
As of the pool's April 30, 2024 statistical cutoff date the entire pool was composed of business purpose, first-lien CRE and include personal guarantees extended to companies that had been in business for about 15 years, DBRS said. The pool has strong overall credit characteristics. On a weighted average (WA) basis, the loans have an obligor FICO score of 748, and a current loan-to-value (LTV) ratio of 51.9%. On average the loans have a balance of $1.5 million, DBRS said.
Geographically, the loans are heavily distributed to California, which accounts for 68.5% of the pool by current balance. Following that Florida, Oregon and Maryland, which account 5.51%, 4.60% and 3.72%, respectively.
