Deutsche Bank priced the €250.04m DECO 2014-Tulip CMBS last night achieving a blended note margin of 119 basis points across the five tranche investment grade securitisation.
The final pricing was as follows:
- Class A: the €170m AAA notes at 3m€+98; 38.9% LTV, 4.0 WAL;
- Class B: the €20.00m AAA/AA (S&P/DBRS) notes at 3m€+120; 43.4% LTV, 4.2% WAL;
- Class C: the €20.00m AA+/A (high) notes at 3m€+155; 48.0% LTV, 4.2% WAL;
- Class D: the €20.00m AA/A(low) notes at 3m€+170; 52.6% LTV, 4.2 WAL;
- Class E: the €20.04m A/BBB at 3m€+210; 57.2% LTV, 4.2 WAL
Deutsche has benefited from the rapid tightening in lending margins over the last 15 months, the erosion of some risk premium attached to lending against Netherlands assets as well as improving liquidity in capital markets.
The blended note margin achieved was 10.8 bps tighter than Deutsche Bank’s Friday afternoon initial pricing guidance – for which the blended margin on the notes was 129.8 bps over three-month Euribor – increasing the bank’s profitability further on the transaction.
The blended margin for DECO 2014 Tulip’s two senior loans – the €125.49m Windmolen Loan (priced at 500 bps) and the €124.5m Orange Loan (priced at 310 bps) – is 405.4bps.
Based on a blended priced note margin of 119 bps, the net profit margin, excluding upfront and ongoing costs, is 286.4bps, which implies an initial annual profit for the DECO 2014 Tulip CMBS of around €7m.
Upfront costs include rating agency and legal fees, while ongoing costs comprise liquidity, cash manager and accounting fees. The single largest cost will be Deutsche Bank’s fee for the €28m liquidity facility it has provided – mandatory for a AAA rating from the rating agencies.
The two loans are secured by 20 retail and office properties over 142,672 sq m in the Netherlands, with a combined market value of €438.85m. The occupancy level is 81.1%, and there are 76 tenants which have a weighted-average lease term to first break of 5.7 years.