ReadyCap Commercial plans a $181.9 million securitization of small balance commercial mortgage loans, according to a DBRS presale report.

The securitization, ReadyCap Commercial Mortgage Trust 2014-1, is backed by 71 fixed- and floating-rate loans secured by 75 commercial and multifamily properties.

The loans in the pool have an average balance of $2.6 million, significantly lower than the average loan balance for CMBS 2.0 deals of approximately $18.1 million.

Small balance loans have historically experienced significantly higher loss severities in the event of default than larger loans. However the loans in the ReadyCap pool are located in mostly urban markets. “Properties located in urban markets typically benefit from higher levels of liquidity in times of stress compared to smaller markets,” the presale report states.

Eleven loans, representing 11.9% of the pool, have a floating interest rate. Thirteen loans, representing 25.3% of the initial pool balance, will pay interest only for the entire terms.

DBRS assigned preliminary ‘AAA’ ratings to $129.6 million of class A notes that are structured with 28.75% credit enhancement. Also on offer are $12 million of class B notes, also rated ‘AAA’; $7.27 million of class C notes rated ‘AA’; $7 million of class D notes rated ‘A’; $10.9 million of class E notes rated ‘BBB’ and $5.4 million of class F notes rated ‘BB’.

ReadyCap is a unit of Sutherland Asset Management, a real estate investment trust managed by Waterfall. The company has been in business for slightly longer than a year. It originates small balance commercial and multifamily loans with balances generally between $1 million and $10 million. In its first year, ReadyCap funded about $125 million.   

Over the past year its has assembled a senior management team with significant small balance lending experience at companies such as Washington Mutual and Principal Financial. DBRS stated in the presale report that it “considers the experience of senior management on the stabilized lending side to be very strong.”

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