Societe Generale and a group of partnering issuers are pooling $736 million in U.S. securitized commercial mortgages concentrated in retail, office and hospitality.

SG Commercial Mortgage Securities Trust 2016-C5 is the first publicly registered asset-backed commercial mortgage offering through the trust since forming its U.S. CMBS business 18 months ago, and closing its first commercial real estate loan in April 2015.  

The notes to be issued publicly consist of five super-senior Class A notes totaling $515 million with a preliminary ‘AAA’ structured finance rating from Fitch Ratings, supported by 30% credit enhancement. A subordinate ‘AAA’ tranche of Class A-M notes, sized at $50.7 million, carries 23.125% CE.

A tranche of Class B notes ($35.9 million) and Class C notes ($33.16 million) are also part of the offering. Societe Generale and the other issuers have privately placed a series of subordinate notes included in the trust series totaling $101.9 million.

Other issuers in the pool include the CRE lending units of Cantor Fitzgerald, Benefit Street Partners and Natixis N.S., along with Silverpeak Real Estate Finance, an affiliate of hedge fund manager Elliott Associates.

The pool of 47 loans are generally large-sized, long-term borrowings with an average loan size of $15.7 million original terms of 112.4 months. Fitch says the transaction has a below average concentration (the 10 largest loans are 43.4% of the pool balance) but carry a higher-than-average concentration of riskier hotel properties of 20.9%, compared to average multi-borrower CMBS portfolios of 17% in 2015 on deals rated by Fitch.

Hospitality properties are the third-highest segment of loans in SG Commercial, behind retail properties (31.5%) and office complexes (31.2%).

The largest loan within the trust is a $40 million mortgage for a New Hampshire shopping mall, The Mall at Rockingham Park, representing 5.4% of the pool balance. The Mall has significant pari passu external debt of nearly $220 million outside the trust, but Fitch notes the Rockingham Mall is a strong retail performer. The shopping center generates an estimated net cash flow of $21 million annually and has a stand-alone investment-grade credit opinion from the ratings agency.

Fitch says the average loan-to-value of the trust is 107.7%, which is in line with other recent CMBS deals – as is the debt service coverage ratio of 1.15x.

Fitch imposed a 10.45% haircut on its projected aggregate cash flow from the estimate provided by the issuer. Fitch expects the properties will generate annual net cash of $67.1 million instead of $75 million due to differences primarily in occupancy costs, vacancy rates and management fee projections.

Wells Fargo is the master servicer of all the loans. The deal was underwritten by SG Americas Securities, Cantor Fitzgerald & Co., and CastleOak Securities.

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