Wells Fargo’s new commercial mortgage securitization of $757.1 million in notes includes backing from a key property centered on gentrification efforts in Queens.
Wells Fargo’s Series 2016-NXS6 includes the pooling of a $70 million share in the $165 million construction refinancing costs for the new QLIC luxury apartment complex, located in the fast-growing West Queens neighborhood of Long Island City.
QLIC, owned by New York real estate developer World-Wide Group, is bringing 421 $3,000-a-month units into a market with an expected surge of 14,000 new apartments under development or planned in Long Island City.
Fitch Ratings has assigned provisional ‘AAA’ ratings to $529.9 million of five Class A strips of super-senior notes, which carry 30% credit enhancement. Fitch also rated a subordinate $48.3 million senior tranche of Class A-S notes a ‘AAA’ rating, with 23.63% enhancement.
The new trust’s pool, mostly comprised (61%) of loans originated or sponsored by Natixis Real Estate Capital, is predominately tied to contracts to New York-area properties (31.5%) and in office (27.1%) and retail (26.9%).
The pool consists of mortgages spread across 50 loans for 63 properties, with the 10 largest loans comprise 57.7% of the pool. The weighted average loan size is $15.1 million and has a mortgage rate of 4.33%. Ten of the loans are interest-only.
Fitch, in a pre-sale report issued Wednesday, notes that the deal has a higher-than-average concentration rate compared to 2015 and 2016 multiborrower deals rated by the agency. That includes a higher rate of interest-only loan balances: 10 I/O loans make up 50% of the pool’s collateral, compared to the average of 23.3% in Fitch-rated deals in 2015 and 30% for deals year-to-date in 2016.
The transaction also contains a 47.46% concentration of loans with additional pari passu debt outside the trust.
Among those is the QLIC development, across the East River from Midtown Manhattan. The QLIC development has par senior external debt of $70 million and subordinate secured debt of $20 million outside the trust. The QLIC loan refinanced $100 million in construction costs as well as paid for $51.5 million equity return to World-Wide Group.
Significant pari passu debt is also held by the owners of the next two biggest loans in the pool: Norvo Nordisk and Rentar Plaza.
The 2016-NXS6 trust has a $73.3 million portion of a $168.3 million loan for a Korean-owned joint venture’s purchase of the Norvo Nordisk office complex in Plainsboro, N.J.
Rentar Plaza, a mixed-use industrial, retail and office complex near Flushing, N.Y., has a $60 million share of its debt in the 2016-NSX6 pool and another $132 million in outstanding external debt that was used to refinance an existing mortgage and pay out $34.6 million in equity.
Other loans in the pool were underwritten or sponsored by Silverpeak Real Estate Finance (16.5%) and UBS AG (15.8%) – the latter of which purchased the commercial loans from its UBS Real Estate Securities unit that ceased its securitized lending program in August. Wells Fargo, the master servicer of the trust, originated loans accounting for 6.7% of the pool.
