LSTAR Capital Finance is returning to the securitization market with another offerings of bonds backed by high quality, but highly leveraged commercial mortgage bonds.
The deal is collateralized by 29 loans secured by 32 properties, all of them originated by LSTAR, an affiliate of Lone Star Funds, a global private equity firm.
The pool’s leverage is high compared with other multiborrower deals rated by Fitch Ratings. Specifically, the debt service coverage ratio, as measured by Fithch, is 1.06x, lower than the YTD 2017 and 2016 averages of 1.24x and 1.21x, respectively.
Similarly, the loan-to-value raito, as measured by Fitch, is 119.2%, higher than the YTD 2017 and 2016 averages of 105.4% and 105.2%.
The pool is also highly concentrated in a few loans. The largest 10 comprise 62.7% of the pool, which is worse than the YTD 2017 and 2016 averages of 50.5 % and 54.8%, for other Fitch-rated multiborrower deals.
The largest property-type concentration is office at 47.3% of the pool, followed by multifamily at 20.7% and hotel at 15.6%.
Fitch is provisionally rating the senior tranches of tranches of the deal, AAA. LSTAR has to pay up for this top rating howver, as the tranches benefit from 36% credit support, versus 30% for typical multiborrower transactions.
Citigroup Global Markets and Wells Fargo Securities are the placement agents.
In order to comply with risk retention, LSTAR will purchase and retain an eligible horizontal interest equal to 5% of the economic risk of the deal.