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Low property leverage highlights new $630.8 million CMBS conduit deal

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A new $630.8 million securitization of commercial mortgages issued or acquired by four lenders will have one of the lowest loan-to-value ratios of any muiltiple-property conduit deal of 2020.

According to ratings agency presale reports, the DBJPM 2020-C9 transaction pooling 30 loans secured by 146 properties is being marketed with LTVs well below the average debt level of any multi-asset commercial mortgage MBS offering dating back to mid-2019.

Kroll Bond Rating Agency estimates a Kroll LTV evaluation of 84.9% of the pool of loans in the deal, the lowest among the last eight Kroll-rated conduits to price in the CMBS market. DBJPM 2020-C9 is also the third-lowest among all Kroll-rated deals (excluding single-asset, single-borrower transactions) since 2012.

Moody’s Investors Service weighed in with a higher LTV estimate of 93.6%, which is still “well below” the average 111.1% LTV of CMBS transactions rated by Moody's over the past year.

The Naperville (Ill.) Woods Office Center near Chicago is one of four office properties pooled by ELAD Canada Realty in the deal.

The pool is top-heavy in loans from property portfolios with investment-grade characteristics, including five of the six largest loans in the trust. The largest loan is a $61 million portion of a $231 million whole loan backed by 42 industrial and four office properties owned and managed by a commercial REIT affiliate of ELAD Canada Realty. (The Toronto-based company is one of three subsidiaries of the New York-based real estate conglomerate El-Ad Group that is privately owned by the Israeli billionaire Yitzhak Tshuva.)

Also among the higher-grade debt assessments is the MGM Grand & Mandalay Bay casino portfolio (with a $50 million syndicated loan allotment to the trust), Blackstone Group’s BX Industrial Portfolio (also $50 million), and the Paramount Plaza office building at 1633 Broadway ($40 million), which has had a $1 billion loan parceled out through several different CMBS conduit deals since the loan was issued last November.

The transaction will feature 22 classes of certificates, with senior notes earning preliminary triple-A ratings from Moody’s and Kroll. The senior notes benefit from 30% credit enhancement.

The 30 loans backing the notes have average remaining terms of 8.4 years. Twenty of the loans are full-term interest-only. Approximately 76% were used for refinancing purposes.

Most of the pool’s loans are tied to office properties (37.1% of the collateral), followed by industrial (20.9%), retail (12.8%), and mixed-use (12.3%).

Due to concerns about the extent of coronavirus-related pressure on borrowers, seven of 13 loans originated since April 2020 were structured with three months of upfront debt-service reserves to account for any possible forbearance requests from borrowers or tenants.

All of the loans were contributed by Deutsche Bank's German American Capital Corp., JPMorgan, Goldman Sachs and Benefit Street Partners Realty Trust.

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CMBS Deutsche Bank Goldman Sachs JPMorgan Chase Benefit Street Partners