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Morgan Stanley, Citigroup Issue Latest CMBS Deals

Morgan Stanley and Citigroup were among a trio of commercial mortgage securitizations with presale reports issued Monday.  

Morgan Stanley is securitizing a pool of commercial mortgages in a $719.8 million asset-backed structure.

MSCI 2016-UBS11 is backed by 38 commercial mortgages secured by 75 properties. The structure includes six classes of senior Class A notes with 30% credit enhancement, and expected ‘AAA’ structured finance ratings by Kroll, Standard & Poor’s and Moody’s Investors Service. The Class A notes total $564.1 million of the bond structure. Moody’s did not rate the subordinate classes of notes.

The loans in the collateral pool are generally 10-year notes with 4.23% weighted average loan coupon. Most of the loans (36%) are in the riskier lodging sector, with 26.4% in retail. Twenty-eight of the 38 mortgages have an amortizing balloon payment. Most of the loans were used to refinance debt, according to Kroll.

The largest loan in the pool is the Vertex Pharmaceuticals HQ, which has a pari passu portion of its loan securitized by another ABS facility, CD 2016-CD1 as well as Citigroup’s Commercial Mortgage Trust 2016-C2 transaction (see below.) Three other mortgages in the pool also have similar split loan structures.

A notable feature of the trust is the relatively low weighted in-trust average loan-to-value ratio of 91.5%, lower than any of 17 CMBS deals rated by Kroll in the past six months, according to the agency.  The pool’s exposure to loans with LTVs (as assessed by Kroll) in excess is just 40.5%, compared to the average comparable deals at 60.8%.

The loans were sold by UBS Real Estate Securities, KeyBank National Association, Natixis Real Estate Capital and Morgan Stanley Mortgage Capital Holding.  

Citigroup’s Commercial Mortgage Trust 2016-C2 is a $609.17 million syndicate conduit transaction that includes consortium of large loan properties such as the Vertex headquarters, Opry Mills, Westlake, Ohio’s Crocker Park retail center and the Honeygo Village Center anchored retail complex in Perry Hall, Md.

The transaction includes five Class A notes with 30% credit enhancement, and a subordinate Class A tranche with 25% enhancement. All of the fixed-rate Class A notes carry provisional ‘AAA’ ratings from DBRS and Fitch Ratings.

Citigroup’s transaction includes 44 loans covering 53 properties, although six of the loans are cross-collateralized and cross-defaulted in three separate portfolios. Similar to Morgan Stanley’s deal, the pool is top-heavy with a top-10 loan concentration of 59.3%.

The loans were sold into the trust by Citigroup Global Markets Realty Corp., Rialto Mortgage Finance, MC-Five Mile Commercial Mortgage Finance, and Walker & Dunlop Commercial Property Funding. All of the loans are serviced by Midland Loan Services, which is part of PNC Bank.

Kroll also rated a new CMBS transaction Monday for loans originated by Key Bank and affiliates of Fortress Investment Group. FORT CRE 2016-1 is a pool of 32 loans for 36 properties that include office (41.5%), retail (22.1%), lodging (15.3%), multifamily (13.4%) and mixed-use (4.9%).

The pool’s committed mortgage balance is $471.5 million, including a reserve amount of $22.1 million associated with nine of the loans. The transaction will include future securitizations.

The Class A structure is includes a Class A-1 tranche totaling $258.7 million (with 45.13% subordination) and Class A-2 notes sized at $31.2 million, with 38.5% subordination. Both are AAA-rated by Kroll.

The loans were all securitized between November 2013 and April 2016.  

Most of the loans – 26, representing 84.3% of the pool – were used for property acquisitions, and the remainder 13% were refinancings.

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