Deutsche Bank has closed the €679.9m DECO 2014 BONN securitisation achieving a blended margin of 199 basis points across the six classes of notes.
Given the metrics of the underlying property portfolio – 29 secondary quality German offices owned by IVG Immobilien with a portfolio weighted average unexpired lease term (WAULT) to first break of just 5.7 years – the achieved pricing underscores the efficiency of capital markets for investment banks exiting risk.
The final DECO 2014 BONN CMBS pricing was as follows:
CLASS SIZE (€m) Rating (S&P/Fitch) COUPON LTV WAL
- A 330.0 AAA /AAA 3m€+125bps 33.5% 4.7
- B 50.0 AA+/ AA+ 3m€+165bps 38.6% 4.9
- C 77.0 AA/ AA- 3m€+190bps 46.5% 4.9
- D 92.0 A / A- 3m€+235bps 55.8% 4.9
- E 89.0 BBB/ BBB- 3m€+345bps 64.9% 4.9
- F 41.9 BB+/ BB 3m€+450bps 69.1% 4.9
Pricing closed yesterday, after initial pricing talk was issued last Wednesday, and takes the annual transaction volume for European CMBS to €3.5bn, and to €4.2bn when privately placed CMBS-like bonds are counted.
Whichever figure is adopted, the annual volumes are substantially below the issuance of 2013, when €8.2bn was closed in 12 transactions. Next year, analysts predict an upswing in total issuance again, with forecasts of up to €8bn for 2015.
The origins of Deutsche Bank’s latest securitisation date back to August 2014 when the Court of Bonn approved IVG’s insolvency plan that included a debt-for-equity-swap of about €1.8bn of bank debt and a waiver of a subordinated €400m hybrid bond.
The following month, Deutsche Bank refinanced IVG with €1.5bn in fresh debt across two loans, in a process dubbed Project Surrogate. The loans were: the €805m AG Facility and the €680m core facility, the latter of which is the loan securitised in the BONN transaction.
Deutsche Bank completed the syndication of the €805m AG Facility around six weeks ago.
The five-year €680.0m IVG Core Loan was funded by Deutsche Bank the on 30 September and is secured by 29 offices throughout Germany valued at €983.66m, according to a December 2013 Cushman & Wakefield valuation. This reflects a 69.1% LTV or €1,349 per square metres.
Bank of America Merrill Lynch (BAML) provided the interest rate swap, and has been given joint billing on the deal as co-arranger and lead manager. Royal Bank of Canada provided the swap cap. BONN matures on 31 October 2009, with a legal final maturity five years later.
The majority of assets located in Stuttgart, Frankfurt, Hamburg and München, each comprising 28.6%, 24.1%, 15.5% and 13.9% of the Portfolio market value, respectively.
There is a concentration of value in the four largest assets – Theodor-Stern-Kai 1 in Frankfurt, Buschlestraße1/ Reinsburgstraße 26-34 in Stuttgart, Fritz-Schäffer-Straße 9 in Munich and Uhlandstraße 2 in Stuttgart – which together account for €603m, or 61.3% of the property portfolio’s value.
All four assets are either fully or majority let to Allianz Deutschland AG, accounting for €37.2m, or 54.9%, of the entire property portfolio’s €67.7m annual gross rental income.