BAML issues ‘Project Moon’ CMBS initial pricing guidance

BAML has issued initial pricing guidance for £211.5m Taurus CMBS UK 2014-1 transaction, the securitisation of Apollo’s senior loan which financed its purchase of Aviva Commercial Finance’s Project Moon UK secondary property portfolio.

BAMLInitial pricing guidance for the three class issuance is as follows:

  • A/A:                       £133.3m @ 150 bps over 3mL
  • BBB/BBB-:           £48.8m @ 260-275 bps over 3mL
  • BB/BB:                  £29.4m @ 375-400 bps over 3mL

This implies that the weighted average margin across Taurus CMBS UK 2014-1 is between 206 and 214 basis points, prior to servicing, legal and other associated transaction and execution costs.

There is no liquidity facility available to noteholders, which partly explains the absence of a AAA-rate class.

BAML has spoken to around 20 potential investors, including prior to the transaction’s launch Tuesday, and is expected to price and allocate on Wednesday.

Apollo, through the wholly-owned Apollo EPF II Partnership, acquired the underlying Project Moon portfolio from Aviva for £351.8m in November last year, financed with a £222.65m whole loan from BAML, which retained 5% pari passu of the whole loan prior to securitisation in line with the EU’s Capital Requirements Directive.

CBRE provided a more recent updated valuation of £347.245m earlier this year, which implies a 64.1% LTV based on the entire £222.65m BAML loan.

BAML’s senior loan is for three year with two one-year extension options.  Project Moon is comprised of 132 UK-wide properties which Aviva Commercial Finance took ownership of through enforcement over defaulted loans.

DBRS, one of the transactions two rating agencies alongside Fitch Ratings, wrote in its presale report: “The primary reason for the foreclosures was too much leverage on the underlying assets. As part of its business plan, the sponsor will be liquidating the assets within the portfolio.”

The ratings agency added that many of the properties are well located in densely populated areas “which should attract third-party investors as the Sponsor looks to liquidate the portfolio”.

After the funding of the loan, but prior to the issuance of this securitisation, a number of assets in the portfolio have been sold. Proceeds from these sales were reflected on the first IPD; the proceeds reflected 1.43% of the allocated loan amounts.

The six largest assets comprise five shopping centres and one retail warehouse, reflecting 40% of the loan by allocated balance. They are:

  • the 275, 484 sq ft Oak Mall Shopping Centre at 1 Hamilton Gate in Greenock, valued at £33m;
  • the 119, 034 sq ft Avenue Retail Park on Newport Road in Cardiff, valued at £27.3m;
  • the 301, 987 sq ft Stamford Quarter Shopping Centre on Ryhall Road in Altrincham, valued at £24.1m
  • the 367, 417 sq ft Stretford Mall Shopping Centre Chester Road in Manchester, valued at £21m;
  • the 208, 382 sq ft Wellington Square on Wellington Street in Stockton on Tees, valued at £16.9m; and
  • the 145,717 sq ft Maylord Shopping Centre on 4 Gomond Street in Hereford, valued at £16.5m.

The portfolio produces a net operating income of £31,692,666, which represents a net initial yield of 9.1% and an average rent of £6.20/sf.

The rated final maturity is May 2022.  CBRE Loan Servicing is the appointed servicer and special servicer for Taurus CMBS UK 2014-1.

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