Bank of America Merrill Lynch (BAML) has issued initial pricing guidance for its TAURUS 2015-3 EU DAC CMBS, the €176.7m securitisation of two loans extended to Starwood Capital’s MStar Europe joint venture with M7 Real Estate.
The initial pricing guidance for TAURUS 2015-3 EU DAC CMBS is as follows:
Class Size Exp. Ratings LTV Initial Pricing Guidance
- A €73.8m AAA/Aaa 28.3% 3mE+150a
- B €17.5m AAA/Aa3 35.0% 3mE+215
- C €19.3m AA/A3 42.4% 3mE+290
- D €23.0m A/Baa3 51.2 % 3mE+350-375
- E €21.4m BBB/Ba2 59.4% 3mE+450-475
- F €21.675m BB/B3 67.7% 3mE+550a
The capital markets execution looks flat relative to the original loan underwriting margin.
Based on the above indicative pricing, this implies a blended coupon of between 283 and 289 basis points, relative to a blended loan margin on the two underlying loans of 291 bps.
BAML’s running costs for TAURUS 2015-3 EU DAC, including a €10.0m liquidity facility and legal costs, implies there will is likely to be a small spread deficit.
While this does not preclude BAML booking a profit, the above analysis implies that the investment bank is likely to issue certain notes at a discount to par, as Goldman Sachs did in its last two CMBS transactions.
One cost mitigating factor for the deal is that the borrower, MStar Europe, will pay servicing fees. DBRS and Moody’s are expected to rate the deal.
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 – a 62-strong light industrial portfolio across France, Germany and the Netherlands – is valued at €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.
For further details on the underlying loans, please see the report by CoStar News last week.