Morgan Stanley and Bank of America have priced $1.3 billion of commercial mortgage backed securities, according to a regulatory filing.
The deal, MSBAM 2014-C14, is backed by 58 loans secured by 75 properties. It includes six tranches with preliminary AAA ratings from Fitch Ratings, Moody’s Investors Service and DBRS that benefit from 30% credit enhancement.
Among these, a tranche with a weighted average life of 2.77 years priced at a spread of 47 basis points over swaps; a 4.95-year AAA tranche priced at swaps plus 62 basis points; a 6.92-year tranche priced at swaps plus 93 basis points; a 9.72-year tranche priced at swaps plus 87 basis points; and a 9.85-year tranche priced at swaps plus 89 basis points.
Those levels were just inside the 9.72-year and 9.83-year triple-A’s of a conduit priced by Deutsche Bank this month.
The pool of loans backing MSBAM 2014-C14 consists of relatively moderate-leverage financing, according to DBRS; the rating agency puts the weighted-average refinance debt service coverage ratio at 1.15 times, based on a weighted-average stressed refinance constant of 9.6%.
In its presale report, DBRS noted that the pool has a relatively high concentration of 11 hotel properties securing 20.8% of the allocated loan balance. “Hotel properties have higher cash flow volatility than traditional property types, as their income, which is derived from daily contracts rather than multi-year leases, and their expenses, which are often mostly fixed, are quite high as a percentage of revenue,” the report stated. “These two factors cause revenue to fall swiftly during a downturn and cash flow to fall even faster, because of the high operating leverage.”
The largest loan backing MSBAM 2014-C14 is AmericasMart a wholesale trade center located in Atlanta, GA that consists of four buildings totaling seven million square feet and represents 9.4% of the pool. The second largest loan is a Wall St. office building, which represents 9.1% of the pool. The third largest loan is a multifamily property, also in New York City, which represents 8.1% of the pool.