Deutsche Bank issues pricing guidance on €355.0m GONDOLA CMBS

Deutsche Bank has issued initial pricing guidance for its first multi-loan European CMBS since the global financial crisis, the €355.0m DECO 2014 – GONDOLA transaction, which is the securitisation of three separate loans to Blackstone to finance logistics, retail and office assets in Italy.

Initial pricing guidance for the five-tranche issuance is as follows:

  • Class A:          A+/AA,  €185.5m, 31.6% LTV @ 150bps over 3mE;
  • Class B:          A/AA, €65.0m, 42.6% LTV @ 180bps over 3mE;
  • Class C:          A-/ A, €30.5m, 47.8% LTV @ 225bps over 3mE;
  • Class D:          BBB-/BBB, €52.0m, 56.7% LTV @ 320bps over 3mE;
  • Class E:          BB/ BB, €22.0m, 60.4% LTV @ 400 bps over 3mE.

Ratings above are by Fitch Ratings and DBRS, respectively.  Expected maturity is February 2019, with legal final maturity seven years thereafter, in February 2026.

Based on the above initial pricing guidance, this would imply a weighted average coupon for DECO 2014 – GONDOLA of circa 233 bps over three-month Euribor, assuming an estimated 30bps for servicing, legal and issuing costs, etc.

The three Deutsche Bank loans to Blackstone in DECO 2014 – GONDOLA are comprised of:

  • the €140m five-year Delphine loan, priced at 425 bps over three-month Euribor, to finance Blackstone’s acquisition of two offices and a hotel;
  • the €134.55m five-year Mazer loan, priced at 425 bps over three-month Euribor, to finance Blackstone’s acquisition of 13 logistics assets in Northern Italy; and
  • the €82.0m five-year Gateway loan, priced at 435 bps over three-month Euribor, to finance Blackstone’s acquisition of two shopping centers in the Veneto region of Italy.

The three loans have a combined original loan balance of €356.55m, against which the underlying 18-strong Italian property portfolio was valued at €587.5m by CBRE and Savills, reflecting an initial LTV of 60.6%.

Based on the weighted average floating rate margin at which Deutsche Bank extended the three loans, and the initial pricing guidance above, the estimated excess spread on GONDOLA is around 194bps.  This would crystallise a significant profit for Deutsche Bank.

The Delphine and Mazer loans funded in late February, while the Gateway loan funded in mid-December.  All three loans were extended to Blackstone, with 80% held by its Blackstone Real Estate Partners IV and 20% via Blackstone Real Estate Partners VII.

The underlying property portfolio in GONDOLA produces €52.5m in total annual rental income, with almost three-quarters, or 73.3% derived from the portfolio’s 10 largest assets, which have a weighted average lease term (WALT) to expiry of 6.1 years and 4.6 years to break.  The entire portfolio has a WALT to expiry of 5.5 years and 4.0 years to break.

The GONDOLA transaction does not have a AAA-rated class because the highest achievable rating is linked to Italy’s sovereign rating.

Deutsche Bank is expected to price and allocate GONDOLA by the end of the month, or early July at the latest.

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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