Prima Capital Advisors has securitized an unusual portfolio of $301.3 million of commercial real estate holdings, according to Moody’s Investors Service.

Moody’s classifies the deal as a commercial real estate collateralized loan obligation (CRE-CLO). This structure is often used by non-bank lenders such as real estate investment trusts to effectively borrow against loans in their portfolios. The properties ultimately backing CRE-CLOs are often being rehabbed or in transition from one kind of use to another.

By comparison, Prima Capital CRE Securitization 2016-VI is backed by a mix of loans and bonds offering direct and indirect exposure to office, retail and multi-family properties. There are 21 collateral interests (19 obligors) in the form of commercial mortgage bonds backed by a single property or loans to a single borrower (71.9% of the initial pool balance); mezzanine interests in commercial real estate, secured by office and retail properties (21.1%); whole loans secured by retail and multifamily properties (3.7%); and bonds issued by real estate investment trusts.

All of the assets were acquired from entities controlled by or managed by Prima, including Prima Mortgage Investment Trust and the San Francisco City and County Employees' Retirement System.

Approximately 22.3% of the collateral assets are currently rated by Moody's and the other 77.7% of the collateral assets were provided an assessment of credit.

Prima Capital CRE Securitization 2016-VI is a static deal; all of the assets were acquired as of the closing date, and the manager cannot sell any of the holdings or purchase new ones during the life of the deal.  That means any unscheduled principal payments of the holdings or sale proceeds of defaulted assets will be used to pay down the notes.

The weighted average coupon of the securities is 4.27%. There is one floating-rate asset (3.7% of the portfolio balance) with a weighted average spread of 4.25% over 1-month LIBOR.

The transaction incorporates both par value and interest coverage tests; if one or more is triggered, they act to divert interest and principal proceeds to pay down their respective senior classes of notes.

The CRE-CLO will issue three tranches of notes that are rated by Moody's: the class A notes are rated Aaa; the class B notes are rated Aa3; and the Class C notes are rated Ba2.

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