A recent commercial mortgage securitization from U.K. property company British Land is expected to give birth to a barrage of international CMBS issuance, market players said last week.

The sterling-denominated transaction, worth $2.5 billion, was the largest-ever commercial property securitization outside the U.S. Agented by Morgan Stanley Dean Witter, the deal was backed by rents from the Broadgate office development in London.

"Structurally, it breaks new ground in what we do as asset-backed finance," said Ian Bell, senior European counsel for Standard & Poor's.

What makes the deal unique, in addition to its size, is the fact that it does not rely on the sale of the property backing it if the rental receipts that the property generates prove insufficient. "What is really interesting is that you have a property worth $3.2 billion and a series of investment-grade debt that totals $2.4 billion, but you have only $160 million of debt which is secured," said Kurt Sampson, an S&P managing director in London.

Nonetheless, the three senior tranches were rated triple-A by the four major rating agencies, in part because the bondholders are protected by guarantees that if the deal hits trouble, a receiver would be appointed whose first duty would be to manage the buildings for the benefit of unsecured noteholders.

Broadgate is just the latest foreign CMBS deal, as eight international issues totaling $2 billion priced in the first quarter of this year. More deals are in the pipeline, according to Merrill Lynch & Co.

- ES, Matthew Davies

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