LStar Capital Finance, the credit affiliate of Lone Star Funds, a global private equity firm, is marketing a $281 million of bonds backed by a mix of new and seasoned commercial mortgages, according to Fitch Ratings.
This marks a change from the sponsor’s previous transaction, LSTAR 2015-2, completed in April, which was backed exclusively by seasoned loans.
LSTAR 2015-3 is backed by two pools of loans: the first is comprised of 13 fixed-rate loans that were recently originated by LStar and represent 86.6% of the balance. Fitch rated these loans using its large loan CMBS criteria. They have a weighted average original term of 10 years. The largest loan, 101 Redwood Shores Parkway, an office tower located in Redwood, Ca., represents 13.1% of the pool, and the top 10 loans ( all originated by LStar) represent 79.8%. Year-to-date, average top 10 concentrations for 2015 and 2014 conduit transactions were 48.5% and 50.5%, respectively.
The second pool is comprised of 49 seasoned, floating-rate, multifamily loans that the sponsor purchased. For these loans, Fitch applied its multi-borrower CMBS criteria. Most of these loans had previously been securitized by LaSalle Bank (now part of Bank of America) in two deals, LASL 2006-MF2 and LASL 2006-MF3; the loans are backed by lower quality multifamily and manufactured housing properties, according to Fitch. All of the loans have been current for at least the last 36 consecutive months.
The combined pools have a loan-to-value ratio, as calculated by Fitch, of 123.7%. That’s significantly above both the 2015 average of 110.4% and the 2014 average of 106.2%. The pool’s debt yield of 7.6% is also below the average of 8.7% in deals rated by Fitch so far this year.
The rating agency assigned an AAA’ rating to $22.3 million of class A1 notes, $83.7 million of class A-2 notes and $26 million class A-3 notes. The notes are structured with 53% credit enhancement, which falls in line with the typical enhancement on large loan CMBS deals (conduit senior tranches are typically structured with 30% subordination).
Fitch did not assign ratings to the junior level senior notes, which benefit from credit enhancement of 35% or any of the subordinated notes. LStar retains the first loss risk.