JP Morgan and Deutsche Bank are relying on Massachusetts Mutual Life Insurance Co. to keep skin in their next commercial mortgage securitization.
The banks are relying on an exception, unique to the CMBS market, that allows a third party purchaser to acquire securities necessary to comply with risk retention rules. The insurance company will acquire an “eligible horizontal residual interest” equal to the fair value of 5% of each class of securities to be issued in the deal.
The collateral for the deal, dubbed JPMDB Commercial Mortgage Securities Trust 2017-C5, consists of 35 fixed-rate loans secured by 50 office, retail and hotel properties.
The three largest are an $80 million portion of a $370 million commercial loan to refinance a Times Square property owned by Jared Kushner; a $62.3 million portion of a $1.27 billion refi loan secured by the 2,860-room Hilton Hawaiian Village in Waikiki, and the fee interest in a $35 million portion of an $85 million loan borrowed for the 777,185-square foot regional Summit Mall in Fairlawn, Ohio.
All of the loans in the portfolio were sold by JPMorgan and German American Capital Corp.
The trust will issue six classes of notes totaling $824.327 million rated f triple-A by Standard & Poor’s, Moody’s Investors Service, DBRS and Fitch Ratings. Each of the notes series is supported by 30% credit enhancement.
Four subordinate tranches (three of them rated) in the capital structure totaling $61.3 million represent an eligible horizontal strip of notes that will be utilized for risk retention purposes.
The $370 million commercial loan (which includes a $285 million first-mortgage and a subordinate $85 million mezzanine loan) was originated by Deutsche last October to refinance a maturing 2007 loan taken out originally from the purchase of the former 18-story New York Times headquarters building for $525 million.
The debt-to-service coverage ratio of the entire 2017-C5 trust pool ranges from 1.44x (Fitch) to 1.76x (S&P).
The property types in the pool are led by office buildings (28%), hotels and lodging sector (19.3%), retail (19.2%) and mix-use (19.1%). Seven loans in the pool (representing 32.8% of the aggregate principal balance) are interest-only, and another 13 (41.6% of the pool, including five of the top 10 loans) have a partial interest-only period).
Twelve of the loans making up 56% of the pool – like the 229 W. 43rd property – have pari passu commitments, and another 33.5% have either subordinate secured or existing mezzanine debt obligations.