Natixis is marketing two separate offerings of commercial mortgage bonds each backed by a single loan; one is secured by a 27-story Manhattan office building and the other by an portfolio of five office and research and development buildings in Silicon Valley.
Natixis Commercial Mortgage Securities Trust 2018-285M is backed by a $235 million five-year, fixed-rate commercial mortgage on 285 Madison Avenue, a 511,208-square foot building in Midtown Manhattan.
The borrower, RFR, is a joint venture between real estate moguls Aby Rosen and Michael Fuchs, who used the proceeds to refinance the building, cashing out approximately $127.3 million in the process.
S&P Global thinks that this represents a risk, because it could reduce the sponsor's incentive to carry the property through any stress. However, the rating agency takes some comfort from the fact that RFR has redeveloped the property. From 2014-2017, the building underwent a comprehensive $75.8 million renovation, or $148 per square foot, that significantly improved the look and feel of the property, allowed for multi-tenant use, and helped the property compete with more modern buildings, per S&P Global.
In addition the loan has minimal rollover during its five-year term with approximately 5.5% of the square footage and 5.3% of the in-place rents expiring in 2022. The majority of the future lease roll is concentrated in 2032 and 2033 with the General Electric and PVH Corp. leases expiring.
Rosen and Fuchs serve also as the loan's guarantors.
S&P Global’s ratings also taking into account the loan’s leverage, which is “moderately higher” relative to other stand-alone commercial mortgage-backed securities transactions it has rated. It puts the loan-to-value ratio at 89.3%, using its own valuation, which is 56.9% lower than the appraiser's as-is valuation. The majority of the difference is explained by the gap between the appraiser's cap rate (4.50%) and the higher cap S&P Global Ratings applied to the property (7.25%).
In addition to the first-mortgage loan, there is additional debt in the form of a $35 million B-note and two mezzanine loans of $120 million and $85.0 million, which increase our S&P Global’s LTV ratio to 180.5% from 89.3%.
The second offering, Natixis Commercial Mortgage Securities Trust 2018-TECH is backed by a $150 million, five-year, floating-rate mortgage secured by five adjacent office and research and development properties located in Santa Clara, Calif.
The borrower is indirectly owned and controlled by Brett Lipman, Farshid Shokouhi, and Ivan Reitman, who also serve as the loan's nonrecourse carveout guarantors.
The portfolio is currently 100% occupied by two tenants, Nvidia Corp. (60.6% of net rentable area and 57.7% of base rent) and Futurewei Technologies (39.3% of net rentable area and 42.3% of base rent), a subsidiary of Huawei Technologies Co. The portfolio has been 100% occupied since 2009.
S&P considers the property to be Class B, based on the current buildouts and amenities offered.
The trust loan is “highly leveraged,” with a 103.8% LTV ratio, based on the rating agency’s own valuation of the property.
In addition to the first-mortgage debt, the property is encumbered by $45 million of mezzanine debt.