Source: CoStar | By: Mark Heschmeyer
The single-borrower market for commercial mortgage-backed securities is off to a strong start this year due largely to a major real estate investment trust merger as investors turn to more secure deals.
Brookfield Asset Management completed the $11.4 billion acquisition of Forest City Realty Trust in December. The purchase consisted of 6.3 million square feet of high-quality office space, 2.2 million square feet of retail space, 18,500 multifamily units, and five large-scale development projects.
Now this month, lenders on that deal have dominated the market, rolling up $2.43 billion of those loans into three bond offerings. Those three deals along with a fourth single-borrower deal has pushed the January single-borrower total so far to $3.07 billion.
That’s ahead of the pace at this time last year of $2.29 billion. Last year’s activity through the same time included nine smaller deals.
Two other single-borrower deals are in the pipeline for issuance, which should keep the pace ahead of last year.
As the commercial mortgage bond market has shown in the past two years, there is a shift toward single-asset, or single-borrower, deals.
Single-borrower bond offerings have become popular with investors partly because on an overall basis, institutional borrowers with higher quality assets are a large part of the sector. That means the bonds historically have lower default rates.
In addition, single-borrower deals have a higher percentage of financing with loan-to-value ratios greater than 60 percent, which is an enticement for borrowers. Such deals also offer borrowers longer terms with more extension options.
Multiple lenders on the Brookfield and Forest City deal contributed loans to the three offerings this year. Citigroup, Barclays Bank, Bank of America, and Deutsche Bank contributed office loans to two deals.
The collateral for the CAMB 2019-LIFE bond offering is a $1.17 billion mortgage loan secured by eight life science properties totaling 1.3 million square feet of Class A office and laboratory space on the campus of the Massachusetts Institute of Technology. The capital includes debt of $130 million subordinate to, and held outside, properties that were initially developed by Forest City.
The collateral for NYT 2019-NYT bond offering is a $515 million loan on the office and retail condominiums of the New York Times Building in Manhattan. The office condominium consists of floors 28 through 50, while the ground-floor retail condominium is 738,385 square feet.
The third bond offering this month tied to the merger is a $745.86 million pool of mortgages offered through Freddie Mac. Wells Fargo contributed to loans secured by 23 multifamily properties.