JP Morgan and Barclays are marketing $1 billion of commercial mortgage bonds backed by a pool of highly leveraged loans that is highly concentrated in a few large properties in New York City.
JPMBB 2016-C1 is collateralized by a total of 50 commercial mortgages secured by 110 properties, according to Fitch Ratings and KBRA.
In addition, the 10 largest loans represent 58.9% of the aggregate balance, which both Fitch and Kroll Bond Rating Agency consider to be high compared with recent transactions. And the top three loans are all located in New York City. The largest is backed by 215 Park Avenue South, a 324,422 square foot, Class-B office building located in the Gramercy section; the second largest by 5 Penn Plaza, a 650,329 square foot, Class-B office building located in the Penn Station section; and the third by 32 Avenue of the Americas, a 27-story, 1.2 million square foot, Class-B office tower located in the Tribeca neighborhood.
This concentration adds risk since, should any of the larger loans default, any related loss would represent a higher proportion of the pool.
Overall, New York represents just 25.3% of the pool’s exposure by state, followed by Florida at 14.7% and Texas at 10.8%. An office is the biggest exposure by property type, at 36.4%, followed by lodging at 19.1%.
The loans were contributed to the trust by JPMorgan Chase Bank, National Association, Barclays Bank PLC, Starwood Mortgage Funding II LLC, and Redwood Commercial Mortgage Corp.
The overall pool has a weighted average in-trust loan-to-value ratio, as calculated by KBRA, of 103.7%, which is above the 102.2% average of the 22 CMBS conduits KBRA rated over the last six months. Fitch calculates the pool's LTV even higher, at 109.5%; however it reckons that this is in line with the 2015 average of 109.3% and higher than the 2014 average of 106.2%.
According to KBRA, however, pool’s leverage distribution is more uniform than many recent transactions in which the overall was skewed by a few high quality loans that helped offset very high leverage in some other loans.
Both Fitch and Kroll assigned triple-A ratings to both the deal’s senior class of notes, which benefit from credit enhancement of 24.25%, and the super-senior tranches, which benefit from 30% credit enhancement.
