JP Morgan plans to issue bonds backed by $500 million loans are secured by four multifamil, high-rises buildintg in New York City's Upper East Side neighborhood.
Properties that secure the four loans backing JPMCC Mortgage Securities Trust 2015-UES include the Solow Tower and Town Houses on 265 E. 66th Street; One East River Place on 525 E.72nd Street; One Sutton Place on 420 E. 61st Street; and Rivers Bend on 501 E. 87th Street. They are part of a portfolio of properties owned by Sheldon H. Solow, a veteran commercial real estate owner and developer. In addition to the four properties in the trust, Solow's portfolio consists of 15 other properties, including his trophy office property, 9 W. 57th Street.
Moody's Investors Service and Standard & Poor's plan to assign 'Aaa' / 'AAA' ratings to the class A notes with 51.25% credit support; , 'Aa3'/ 'AA-' ratings to the class B notes with 41.25% credit support; 'A3'/ 'A' ratings to the class C notes with 34% credit support; and 'Baa3'/ 'BBB' ratings to the class D notes with 24.5% credit support.
S&P alone will rate the class E notes with 10.5% credit support, 'BB-' and the class F notes 'B-'.
Together the loans have a weighted average loan-to-value ratio of 95.9%. All four pay only interest, and no principal, for their entire five-year terms. Interest-only loans have a higher refinance risk compared with loans that amortize because of the higher loan balance at maturity.
Both credit rating agencies said that the market for multifamily properties in Manhattan is currently strong. As of second-quarter 2015, CB Richard Ellis Econometric Advisors reports a market vacancy rate of 2.9% and projects a 4.1% increase in the rental rate for the New York area in 2015. It also projects that average annual vacancy rates will range from 3.1%-4.9% through 2020 and the rental rate year-over-year change will remain positive each year through 2020.
The Upper East Side submarket had a vacancy rate of 3.6% and a 1.4% increase in average rent per unit for the same period the previous year.