Luxury Philly apartments focus of Société Générale large-loan CMBS

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A Philadelphia luxury apartment developer is tapping the commercial mortgage backed securities market via Société Générale to refinance a loan for a renovated, upscale multifamily complex, according to a presale report from S&P Global Ratings.

Post Brothers Apartments is refinancing an existing mortgage with a new 10-year $217.6 million loan, of which $156.7 million will be collateralized in a CMBS large-loan transaction, SG Commercial Mortgage Securities Trust 2019-PREZ.

The loan is secured by the borrowers’ interest in the four-building, Presidential City apartment complex and a neighboring office building the develop owns in Philadelphia, Pa. The loan proceeds were used to pay off a prior mortgage that was securitized in a February 2018 CMBS single-loan transaction via Natixis.

Post Brothers is headed by president and co-founder Matthew Pestronk.

The apartments are owned in the Bala Cynwyd submarket of Philadelphia, and have undergone $140 million in renovations by Post Brothers. (Those renovation costs that were aided by 10-year local property tax abatements – which expire at various times during the tenure of the loan).

The apartments are 94.5% occupied with an average monthly rent of $1,882.

S&P has assigned a preliminary AAA rating to the $48.4 million Class A tranche, as well as ratings to the subordinate bonds: an AA- to the $19 million in Class B notes; an A- to the $18.6 million in Class C notes; a BBB- to the Class D notes totaling $19 million; a BB- to the Class E notes sized at $22.1 million; and B- to the $22.5 million Class F notes tranche.

An $86 million Class X tranche paying interest-only is rated A-.

S&P’s presale report stated the mortgage loan has a high leverage of 93.5%, and cautions that the owners of $72.4 million of mezzanine financing held outside of the trust for the properties. That limits S&P’s calculated debt service coverage ratio to 1.26x, below the trust balance DSCR of 2.04x.

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