Wells Fargo plans to issue a $310 million single borrower CMBS transactions that won't include a third party guarantor to cover "bad-boy" acts.

 

WFCM 2013-120B has been assigned preliminary ratings by Kroll Bond Rating Agency (KBRA). The deal is backed by a single, first lien mortgage loan that is secured by 120 Broadway Holdings LLC’s (the loan sponsor) leasehold interest in  the Equitable Building, a 1.9 million square feet (sf) office property at 120 Broadway, New York, NY.  The property is a 40-story, landmark office building located in the heart of Downtown Manhattan in New York City. 

KBRA noted that  the loan agreement provides for the recourse to the borrower in connection with the commission of certain “bad boy” acts and for certain issues relating to the ground lease; but neither the loan sponsor nor any party other than the borrower will be liable if the non-recourse carve out provisions are triggered, except with respect to certain ground lease issues.

In CMBS deals, the so-called bad-boy carve outs typically provide for personal liability against borrowers and principals of borrowers upon the occurrence of certain enumerated bad acts committed by the borrower or its principals. The mortgage lender and the borrower and/or guarantors are typically liable in the CMBS deals that KBRA has reviewed in the past.  

“Unlike most loans that KBRA has reviewed in connection with single borrower and large loan transactions, in this case, there is no third party guarantor for any other bad acts aside from certain ground lease related issues,” said analysts in the presale report. “This means that if any other non-recourse carve out provisions are triggered, the only party that is available to satisfy the obligations is the borrower.”

The loan has a seven year term and requires monthly interest-only payments calculated using an annualized rate of 2.72%.As of March 2013, the property was 92.4% leased to 74 tenants, including the New York State Attorney General, Tower Group, Inc. and Securities Industry and Financial Markets Association, according to KBRA presale.

The capital structure will offer investors $210.38 million of ‘AAA’ notes; $50.46 million of ‘A’ notes; $48.15 million of ‘BBB-’ notes spilt into two tranches.

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