Two securitizations of short-term loans on shopping malls, apartment buildings and office buildings hit the market Friday.
Both commercial real estate collateralized loan obligations (CRE-CLOs) are backed by portfolios of highly leveraged properties with other below investment grade characteristics.
NorthStar Realty Finance is marketing its fifth deal. The $284.2 million NorthStar 2016-1 is backed by a $284.2 million portfolio of commercial mortgages, including a future funding reserve of $13.8 million.
The collateral pool is comprised of direct real estate interests backed by a diverse mix of tenants: 42.1% are retail properites, 28% multifamily, 20.3% hospitality, 6.6% office and 3% industrial.
The portfolio has a loan-to-value ratio, as measured by Moody’s Investors Service, of 127.4%. The loans are not rated but have below investment grade credit characteristics. The weighted average rating facto is 4554, which is equivalent to a Caa1 rating, with an average recovery rate of 56.8%.
The portfolio has 13 obligors; the largest of which represents 14.5% of the collateral pool. This is more concentrated than other comparable CRE CLOs that have been issued recently.
Morgan Stanley is the underwriter, Wells Fargo Bank is the servicer and NS Servicing II is the special servicer.
The $167 million senior tranche with an assumed coupon of Libor plus 165 basis points is rated ‘Aaa’ by Moody’s; there is also a $27 million tranche rated Baa3, a $14.9 million tranche rated Ba3 and $75.3 million of unrated preferred shares.
Latitude Management Real Estate Investors is marketing its fourth CRE CLO. The $395 million LMREC 2016-CRE2 is backed by a $313.2 million initial portfolio of commercial mortgages, and a $78.3 million funded reserve for ramp assets and future funding commitments.
The manager has 180 days to acquire all of the collateral and can continue to buy and sell eligible assets for two years. Once fully ramped, the deal will have a collateral pool of 35 whole loans or senior participations with direct interests in 43 properties, 80.2% of which are multifamily properties.
Among the risks, according to Moody’s, 16 of the loans totaling $30.8 million, or 9.8% of the collateral pool, have future funding commitments. This future debt will rank pari passu with the loans in the collateral pool, and will not be acquired by the securitization trust.
The portfolio has a loan-to-value ratio, as calculated by Moody’s, of 128%. The initial assets have a weighted average rating factor of 4711, which is equivalent to a Caa1 rating with a recovery rate of 58.5%.
The $228 million senior tranche issued by the deal with a presumed coupon of one-month Libor plus 185 basis points is provisionally rated Aaa.