Realty Finance Trust, a commercial mortgage real estate investment trust, is making its inaugural trip to the securitization market with $428.4 million of bonds backed by short-term loans, according to DBRS.
The deal, called RFT 2015-FL1, is backed by 28 floating-rate loans with terms that range from two to four years; however an extension option can push the loan terms out to six years.
Unlike lager conduits backed by a more diversified pool of fixed-rate loans, RFT 2015- FL1 is relatively concentrated, based on loan size. The loans are secured by 28 transitional commercial, multifamily and hospitality properties. The Sheraton at Northbrook, representing 3.9% of the pool, is the only loan secured by a hotel property.
The 10 largest loans represent 57.5% of the pool. Overall, the properties are well located in larger markets. Properties located in larger markets typically benefit from higher levels of liquidity in times of stress compared to smaller markets.
Only two loans, comprising 5.3% of collateral pool, are located in a tertiary market, and one loan, representing 2.8% of the pool, is located in a rural market. Twenty-four of the loans, representing 88.0% pool balance, will be available to fund a total of $95.1 million in future securitizations. The future CMBS participation will range from $540,000 to $18.5 million per loan.
DBRS assigned preliminary ratings of 'AAA' to the class A notes to be issued by the deal; 'A' to the class B notes; and 'BBB' to the class C notes.
RFT was formed in 2012 and began trading as publicly registered REIT in 2013. Although the sponsor is relatively new in the CMBS space, its investment team consists of seasoned professionals with institutional investment experience at companies including Nomura Securities and Credit Suisse. RFT believes that the large number of CMBS loan maturities over the next few years provides them with plenty of origination opportunities.