TPG Capital is including its newly acquired, first-lien interest in a Microsoft-leased office campus in a new $530 million single-loan commercial mortgage-bond securitization.
According to a presale report from S&P Global Ratings, the real estate arm of the private equity giant is marketing a two-year, interest-only loan through the CMBS market that includes its fee and leasehold interests in the Redmond, Wash.-based Millennium Corporate Park, an asset it acquired in July for $154 million.
The property is among 15 high profile, single-tenant properties owned by TPG (two via ground-lease only) that secure the loan. The loan was underwritten and sold into the CSWF Trust 2018-TOP by Wells Fargo and special-purpose entity Column Financial Inc. to 18 special-purpose entities controlled by TPG (with each joint and several obligations of all the other borrowers). Credit Suisse served as the depositor.
The properties include primary- and secondary-market office locations in three states for Amazon, Bank of America, Bristol-Myers Squibb, Wells Fargo, Amazon, UnitedHealthcare, Barclays, Accenture and Syngenta AG, according to S&P.
The “majority of the assets house strategic locations for nationally recognized tenants that have shown their commitment to their space through expansion and tenant improvements,” according to S&P’s report. Two of the properties are long-term ground-lease arrangements with Bank of America (Charlotte, N.C.) and Amazon (Phoenix) in which building ownership is tied to tenants.
The capital stack includes four classes of investment-grade rated notes, four unrated subordinate classes and two interest-only tranches. S&P assigned preliminary triple-A ratings to $205.9 million in Class A notes to the highly leveraged portfolio backed by the interest-only loan (the deal has a beginning and ending loan-to-value ratio near 111%), which has five optional one-year extensions.
The rated tranches include the $47.9 million Class B notes (AA-), $35.9 million in Class C bonds (A-) and a Class D tranche totaling $44.06 million and rated BBB-.
S&P said despite the high leverage and geographic concentration in California (28.1%), Washington (24.4%) and North Carolina (9.9%), the portfolio is “large and diverse” covering 3.06 million square feet of properties that are 97.9% occupied by 26 unique tenants. The tenants are predominantly long-term with an average tenure of 15 years.
S&P estimates annual cash flow of $39 million (a 19.2% haircut to the issuer estimate) and a debt yield of 9.9% on the deal.
The six-building Millennium campus represents the largest share of the pool’s allocated loan amount at 24.4%. The $84 billion-basset TPG bought the six-building campus last month from a TIAA annuity fund through New York-based TH Real Estate (itself an affiliate of TIAA’s Nuveen unit). The property is reportedly 89% leased by Microsoft and located near the software giant’s own Redmond headquarters.
