ReadyCap Lending LLC has launched a $218.8 million small balance commercial loan securitization, according to Moody’s Investors service.
ReadyCap Commercial Mortgage Trust 2015-2 is backed by 99 fixed rate and Hybrid ARM loans secured by 106 properties.
Approximately 58 loans, representing 31.4% of the pool balance, had a loan balance that was less than or equal to $2.0 million. Approximately 34 loans, representing 44.7% of the pool balance, had an original loan balance that was between $2.0 million and $5.0 million.
Small loans bring an assortment of risks, the most important of which relates to a correlation between property size and value volatility, according to Moody’s. Net cash flow amounts at the property level are low compared to properties typically found in CMBS. Nominal changes to property revenues and expenses can produce relatively significant changes on a percentage basis.
For these reasons, smaller loans, particularly loans less than $2.0 million, have historically exhibited higher default and severity rates.
The pool’s weighted average remaining loan term and remaining amortization term are 100 months (8.3 years) and 289 months (24.1 years), respectively. Twenty-eight loans, representing approximately 24.3 % of the pool balance, are structured as having short amortization schedules of 300 months or less. Seven loans (12.9% of the pool balance) provide for interest only payments for their entire respective loan term. There are seven loans (10.5% of the pool balance) with partial interest only periods and the pool does contain six fully amortizing loans (1.2% of the pool balance).
The biggest concentration by property type, at 42.7% of the pool balance, are multifamily properties, which Moody’s says have historically exhibited low cash flow volatility relative to other commercial real estate sectors. Multifamily properties have also historically benefited from lower severities when defaulted.