Two commercial mortgage securitizations launched Monday add over $1.2 billion to the new-issue pipeline, according to rating agency reports.
The $300 million COMM 2014-BBG is backed by a single mortgage loan secured by the fee interest in two condominium units at 731 Lexington Avenue, comprising 904,573 square feet of class A office space within a mixed-use high-rise building in Midtown Manhattan. The loan has an initial term of three years, maturing March 2017, with four one-year extension options. The loan is interest-only for its term and has a floating interest rate equal to LIBOR plus 0.95% during the entire term.
The borrower is 731 Office One LLC, a special-purpose entity that is indirectly majority-owned and controlled by Alexander's Inc. German American Capital Corp. originated the loan.
Standard & Poor’s has assigned preliminary Aaa’ ratings to the notes. Among the deals strengths, it cited the low loan-to-value ratio of 42.1%.
Among its weaknesses, the transaction is significantly exposed to Bloomberg because the tenant occupies 97.9% of the building and generates 98.3% of the in-place base rent. “However, the space serves as Bloomberg's headquarters and it has occupied the building since it opened in 2004,” the report stated.
The borrowers have entered into an interest rate cap agreement with a strike price of 6.0% during the initial term.
The other deal, COMM 2014-LC15, is a $927.5 million CMBS conduit transaction collateralized by 48 commercial mortgage loans secured by 197 properties, according to a presale report published by Kroll Bond Ratings.
The loans have principal balances ranging from $1.5 million to $83.0 million for the largest loan in the pool, which is secured by One Kendall Square (8.9%), a 610,110 sf mixed-use complex located in Cambridge, Massachusetts.
Three mortgage loan sellers contributed loans to the pool: Ladder Capital Finance (23 loans, 43.7%), German American Capital Corp. (12 loans, 37.7%), and Natixis Real Estate Capital (13 loans, 18.6%).
The deal will issue 19 classes of certificates will be issued, eight of which earned preliminary AAA’ ratings from Kroll.
Among ratings considerations, the overall pool has a weighted average in-trust Kroll-adjusted loan-to-value ratio of 103.8%, which is higher than any of the last 16 CMBS conduits rated by KBRA over the past six months. Also, eight loans (43.4%) either have existing subordinate indebtedness (six loans, 26.4%) or allow future subordinate debt to be incurred (two loans, 16.8%). This is above the average amount of existing and permitted future indebtedness (27.9%) for the conduits rated by KBRA over the past six months.
The underlying collateral properties are geographically diverse as they are located in 23 states. However, there is a sizeable New York concentration (24.0%), and the top five geographic exposures represent 58.9% of the pool, which is higher than the average of 55.2% for the CMBS conduit transactions rated by KBRA over the past six months.