Bank of America Merrill Lynch (BAML) has launched the securitisation of two loans amounting to circa €186m extended to Starwood Capital’s MStar Europe joint venture with M7 Real Estate secured by a 62-strong light industrial portfolio across France, Germany and the Netherlands.
The capital structure of the TAURUS 2015-3 EU DAC CMBS – following BAML’s 5% retention of the underlying senior loan – is as follows:
CLASS SIZE EXP. RATINGS LTV WAL Debt Yield (%)
- A €73.8m AAA/Aaa 28.3% 4.5 29.3
- B €17.5m AAA/Aa3 35.0% 4.5 23.7
- C €19.3m AA/A3 42.4% 4.5 19.5
- D €23.0m A/Baa3 51.2 % 4.5 16.2
- E €21.4m BBB/Ba2 59.4% 4.5 13.9
- F €21.675m BB/B3 67.7% 4.5 12.2
DBRS and Moody’s are expected to rate the deal. As stated above, the weighted average loan length is 4.5 years, which an expected maturity scheduled for April 2020 and legal final maturity eight years later in April 2028.
The two loans were extended around May to MStar Europe, the multi-let industrial property joint venture which is 95%-owned by Starwood Fund IX and 5%-owned by M7 Real Estate.
The aggregate portfolio value is €274.6m, which by value is split: €107m in France; €93.4m in Germany; and €74m in the Netherlands. There are 329 tenants across the portfolio. The current occupancy level is 85% across both TEIF and Bilux portfolios.
The weighted average lease term (WAULT) to first break/expiry is 2.9 years and 3.0 years in TEIF and Bilux, respectively.
The first loan is the circa €82.2m five-year TEIF loan is secured by 31 assets across 210,103 sq m in all three countries with an appraised value of €126.4m.
The Starwood-led joint venture partners acquired the formerly-listed fund for approximately €134m, comprised of a €66.7m cash payment, through a share acquisition in June 2014, and €67.2m in outstanding debt, previously equally held by Deutsche Bank and Macquarie Bank.
CoStar News reported the subsequent refinancing mandate in August 2014.
BAML’s TEIF loan, at a 65% LTV, was priced at 280 basis points over three-month Euribor. The TEIF portfolio’s gross rent is €11.8m and net operating income (NOI) is €9.5m.
The second loan in TAURUS 2015-3 EU DAC is the circa €103.8m five-year Bilux loan, secured by 31 assets across 350,695 sq m in Germany and the Netherlands with an appraised value of €148.24m. Bilux’s gross rent is €16.8m and the NOI is €13.2m.
BAML’s refinancing of the Bilux portfolio can be traced to an original 32-strong pool – comprising 14 in Germany and 18 in the Netherlands – back in March, which was collectively valued at €151.36m, according to a Cushman & Wakefield valuation.
MStar Europe piecemeal acquired the Bilux portfolio. The assets were purchased, inter alia, from the €71m acquisition of 10 warehouses in the Netherlands from Rockspring, formed from the majority of the former Zander portfolio sold by AXA Real Estate in January 2014; and five German assets bought for €44.7m from funds managed by Valad Europe.
Prior to securitisation, one asset was sold – thought to be 15 Raiffeisenstrasse in Darmstadt – reducing the portfolio’s value to €148.24m. BAML’s refinancing was dubbed Project Bilux, for which the loan took its name. Cushman’s March 2015 valuation remains public domain and can be viewed here.
BAML’s Bilux loan, at a 70% LTV, was priced at 300 bps. The blended loan margin for BAML’s TAURUS 2015-3 EU DAC is, therefore, 291 bps.
Assuming around 15 basis points for the combined running costs of the transaction, BAML will need to achieved a blended coupon price of sub 275 bps to enter profitable territory.
Competitive bilateral lending markets with recent macro volatility have combined to narrow the profitability for capital market executions in recent months.
This was evident in Goldman Sachs recent CMBS deals, the €181.95m Reitaly Finance and the £646m Logistics UK 2015, as well as the attempted refinancing of a Goldman’s existing Gallerie 2013-1 CMBS deal by Deutsche Bank, in a transaction dubbed Crescendo.
In periods of volatility, issuing investment banks need to shorten the window between loan underwriting and deal execution in an effort to minimize that risk, a common sense strategy which has been somewhat hampered by the summer season.
BAML is expected to issue initial pricing guidance next week with a closure within two weeks, mindful of next Monday’s Labour Day bank holiday in the US.