TPG marketing largest CRE CLO of 2019 in $1.23B deal

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TPG Real Estate Finance Trust (NYSE: TRTX), a real estate investment trust controlled by private equity firm TPG Capital, is sponsoring the largest CRE CLO to date in 2019.

TGP is marketing the $1.23 billion TRTX 2019-FL3 Issuer, Ltd. Transaction, which has an initial pool of 22 borrowers of interest-only bridge loans on properties undergoing rehabilitation or conversion.

The commercial real estate CLO deal is the third for the REIT, which last year issued two CRE CLO deals totaling $1.93 billion.

The collateralized loan obligation/CDO structure has become an increasingly attractive way to finance CRE lending that has traditionally been kept on balance sheet of lenders – and a burgeoning tool for PE firms finance real estate acquisitions and development/renovation costs.

The largest CRE CLO top price in 2019 was the $936 million STWD 2019-FL! Deal sponsored by Starwood Capital Group Global in July.

TRTX 2019-FL3 has eight classes of senior and subordinate notes, including a $621.3 million Class A notes tranche with an assumed coupon of Libor plus 1.25%, according to a presale report from Moody’s Investors Service. The Class A notes have a preliminary Aaa rating from Moody’s.

Moody’s does not rate the surbordinate/mezzanine notes or a $186.1 million Class A-S tranche that is second in the collateral consists mostly of multifamily properties (45% of the pool’s assets) and office buildings (30.5%). Hotels also make up 11.8% of the initial pool of loans.

The largest loan is in the pool is a $110 million loan for a Florida apartment portfolio.

According to Moody’s, the deal has a weighted average life of 5.5 years, a ratings factor average of 4770 and a WA spread of 2.5%.

All of the assets are considered below investment-grade (Caa1 or below).

The transaction is underwritten by JPMorgan, Goldman Sachs, Morgan Stanley, Wells Fargo and U.S. Bancorp.

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