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Wells Fargo marketing 7th conduit CMBS in $669.8M deal

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Wells Fargo is sponsoring a new $669.8 million commercial mortgage securitization, its seventh conduit transaction of 2019.

The latest deal, WFCM 2019-C54, involves 44 loans secured by 88 properties, with a heavy exposure to office (32%), multifamily (21.1%) and retail (17.9%) properties.

Wells will market 18 classes of notes, including five classes of super-senior notes and a “junior” senior note with preliminary AAA ratings from Kroll Bond Rating Agency.

According to Kroll, the deal is noteworthy for having one of the highest loan-to-value ratios (105.8%, as determined by Kroll) among 20 conduit deals the agency has rated in the last six months. It also has a 77.9% pool exposure to loans that have LTVs over 100%.

The assets are geographically diverse among 39 metropolitan statistical areas including Los Angeles (15.3% of the collateral pool), New York (10.9%), Salt Lake City (5.2%), Columbus, Ohio (5.1%), and Fresno, Calif. (4.9%).

The largest loan in the portfolio is a a $55 million refinancing for Continental Park – Rosecrans Douglas (making up 8.2% of the pool), a 206,012-square-foot office complex in El Segundo, Calif. Although Continental Park is losing its second-largest tenant in 2020 (making up 26.9% of base rent), that loan is structured with a $6.5 million upfront reserve to be used to re-lease the space, according to Kroll.

Another loan of note is a $15.9 million acquisition loan taken out by the new owners for the Hamptons Apartments in Virginia Beach, Va. (making up 2.4% of the pool). Kroll’s report states the apartment is now owned by a crowd-funded investor group — a structure which invites regulatory and compliance risk into a loan since such groups are usually made up of individual investors “who may not have relevant expertise in the commercial real estate market,” Kroll’s report stated.

“[F]ailure to comply with applicable securities regulations could delay enforcement or impair the borrower’s or guarantor’s ability to operate the property or otherwise meet its obligations under the loan documents.”

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CMBS Multifamily Wells Fargo