Lone Star plans to tap the securitization market with a portfolio of commercial real estate assets it acquired this year from various real estate investment trusts, according to Fitch Ratings.

The deal, Lone Star Portfolio Trust 2015-LSP, is backed by a floating-rate $708 million loan that is secured by 92 office and 11 industrial properties. The properties were purchased in three different acquisitions in 2015 for a total cost of $1.056 billion. The loans pay only interest, and no principal, for its entire term.

Most of the leases (75.6%) on the properties are set to expire before the loans fully extended maturity in 2020; and 57% of the leases will expire before the initial maturity of the loan in 2018. However the risk of rollover is staggered throughout the loan term, with no more than 17.1% of total square footage expiring in any year.

The largest tenant, Northrop Grumman, represents 6.8% of the portfolio rent. The second and third largest tenants are IBM and Acxiom/May & Speh, Inc., representing 6.2% and 5.2% of the total rent, respectively. None of the tenants’ leases extend three or more years beyond the initial loan term.

Lone Star plans to repay the loan from sales of the assets after making capital improvements and seeking ne tenants. The loan has loan-to-value ratio, as measured by Fitch, of 91.8%. A future funding mortgage facility of up to $103 million, pari-passu with the trust mortgage loan (trust loan), is available to pay leasing costs and capital expenditures.  

Most of properties in the portfolio are located in suburban areas surrounding major metro markets; Chicago represents the largest market concentration (19.9%), followed by Boston (18.8%), Minneapolis/St. Paul (15.2%), Baltimore (9.6%) and the New York City tri-state area (9.3%).

Fitch has assigned preliminary 'AAA' ratings to $334 million of class A notes. The notes benefit from 52.6% credit enhancement and have a final maturity of September 2028. At the subordinate level, the trust will issuer notes with rating from 'AA-' to 'B-'; all have a final maturity of September 2048.

Lone Star is a private equity firm focused on real estate, equity, credit and other financial assets since 1995. Hudson Advisors, Lone Star’s asset management affiliate, will serve as asset manager of Lone Star Portfolio Trust 2015-LSP has a track record in repositioning capital-starved and/or mismanaged commercial assets.

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