Hudson’s Bay Co. of Toronto, the owner of the Saks Fifth Avenue chain, plans to securitize a $1.25 billion loan secured by the ground beneath the retailer's 611 Fifth Ave.,650,000-square-foot flagship store in midtown Manhattan.
The 20-year mortgage loan is based on an independent appraiser’s assessment of the property’s value at $3.7 billion. In 2013 Hudson's acquired the entre chain for $2.9 billion. The loan pays only interest for its entire 20-year term and was underwritten by Bank of America, N.A., Morgan Stanley Bank, N.A., Goldman Sachs Mortgage Co. and Bank of Nova Scotia, in December last year.
Standard & Poor’s is rating the deal, called SFAVE 2015-FAVE. The trust will offer $556 million of AAA’ rated class A1 notes with credit enhancement at 25.5%; $150 million of class A2-A notes with credit enhancement at 70.2%; $225 million of AAA’ rated class A-2B notes with credit enhancement at 25.5%.
At the junior level, the trust will offer $107 million of AA- rated class B notes with credit enhancement at 16.9%; $135 million of A- rated class C notes with credit enhancement at 6.1%a and ’BBB’ rated class D notes.
Although the Saks Fifth Avenue is not collateral for the loan ( only the land and the lease on the land secure the loan), S&P still considered the income-generating capability of the building in its rating. That is becasue the building genrates the income from which the ground lease is paid; which in trun pays the loan, that pays the bonds.
Hudson’s Bay plans to begin a $250 million renovation on the flagship location this year.