News

CMBS retention 'first' in the works

Tuesday 14 March 2017 15:53 London/ 10.53 New York/ 23.53 Tokyo

The second US CMBS conduit transaction to use an eligible horizontal residual interest, and the first to have that horizontal interest held solely by a third-party purchaser, is currently marketing. JPMDB 2017-C5 is a US$1bn transaction rated by Fitch, Kroll Bond Rating Agency, Moody's and S&P (see SCI's pipeline).

The third-party purchaser is Massachusetts Mutual Life Insurance Company, which will purchase the class D-RR, E-RR, F-RR and NR-RR certificates, representing 5% of the fair value of the transaction. MassMutual will then be contractually obligated to retain those classes for a minimum of five years.

The first CMBS conduit with an eligible horizontal residual interest was JPMCC 2017-JP5 (SCI 2 March). Both Kroll and Moody's say that the retention by MassMutual in the latest transaction is credit neutral, while Fitch and S&P do not express a view.

The A1, A2, A3, A4, A5 and ASB classes have been rated triple-A by Fitch, Kroll, Moody's and S&P. Fitch and Kroll have also rated the AS notes at triple-A, while Moody's rates those notes at Aa3 and S&P does not rate any notes below the ASB class.

Fitch rates the B notes at double-A minus and Kroll at double-A, while Fitch rates the Cs at single-A minus and Kroll at single-A. Fitch rates the class D notes triple-B, while Kroll rates them triple-B plus.

The retained E-RR, F-RR and G-RR classes are rated triple-B minus, double-B and single-B by Fitch and rated triple-B minus, double-B and single-B plus by Kroll. None of the rating agencies rates the NR-RR class of notes.

The CMBS is sponsored by JPMorgan and Deutsche Bank and arranged by that pair plus Drexel Hamilton and Academy Securities. The largest loan exposure in the pool is US$80m of the 229 West 43rd Street Retail Condo loan.

The next largest are 350 Park Avenue, Prudential Plaza, Hilton Hawaiian Village and Key Center Cleveland. Between them, these five loans account for 32% of the initial pool balance.

The pool consists of 31 10-year loans, a single 10.5-year loan, two five-year loans and one seven-year loan. Three of the loan have existing subordinate secured debt in the form of B notes, including the 350 Park Avenue and Hilton Hawaiian Village loans.

By property type, the largest exposure is to office at 32.7% of the pool. That is followed by lodging (19.3%), retail (19.2%), mixed-use (18.7%), multifamily (6.6%) and self-storage.

14/03/2017 15:53:04