The latest two commercial mortgage securitizations to join the new-issue pipeline couldn’t be much more different. J.P. Morgan Chase is preparing a $1.13 billion deal that is relatively diversified by property type but rather highly leveraged, while a $1.17 deal from Deutsche Bank and Cantor Fitzgerald is backed almost exclusively by hotels but has relatively low leverage.
J.P. Morgan Chase Mortgage Securities Trust 2013-C16 (JPMCC 2013-C16) is backed by the beneficial interest in a pool of 60 commercial mortgage loans secured by 113 properties. An unusually large concentration, 29.6%, are multi-family properties, according to a presale published by Fitch Ratings. By comparison, the average concentration in CMBS deals that Fitch rated in the first half was just 8.9%.
The two largest loans in the pool, The Aire (11.9%) and Veritas Multifamily Portfolio (8.1%), are collateralized by multifamily properties located in central business districts of primary markets.
Office properties represented the second highest concentration, at 28.9%.
Fitch said the relative diversity of the pool by property type was a positive factor. Many deals brought to market this year have had relatively high concentrations of retail or hotel properties. The high concentration of multi-family properties is also positive because they are less likely to default than some other property types.
On the negative side is the fact that the transaction has higher leverage than other recent Fitch-rated fixed-rate deals. The pool’s loan-to-value ratio, as calculated by Fitch, is 106.6%, higher than the 2012 and first-half 2013 averages of 97.2% and 99.8%, respectively. However, excluding the two largest loans secured by multifamily properties in New York City and San Francisco, the pool’s Fitch LTV is 103.0%.
Fitch Ratings has assigned preliminary ‘AAA’ ratings to six tranches of certificates that benefit from credit enhancement of 30% and have a final maturity of December 2046.
COMM 2013-FL3, on the other hand, is collateralized by five loans secured by the fee and leasehold interests in 37 properties. Four of the five loans, which comprise 90.3% of the pool, are secured by lodging properties, which can have more volatile cash flows than other property types due to their dependence on nightly room rates, according to a presale from Kroll Bond Rating Agency. The fifth property, Beekman Tower (9.7% of the pool), is secured by a multifamily corporate housing project in New York City’s Manhattan borough.
On the plus side, however, Kroll calculates the average LTV of senior debt on the properties at 49.6%, and the LTV inclusive of junior participations is 66.4%. Kroll noted that the lower leverage levels reduce the likelihood of default, and provide a buffer against potential losses.
In research published Friday, analysts at J.P. Morgan put the “visible” CMBS pipeline at more than $15 billion. They said this figure suggests that the fourth quarter will be one of the busiest for the market since the financial crisis. Together with the $9.9 billion already priced or announced so far this quarter, issuance in the fourth quarter should easily exceed $20 billion, and may eclipse the previous record of $22.1 billion set in the first quarter, the report stated.
