BAML issues initial pricing guidance for Blackstone CMBS which implies c. 300 bps blended bond margin

BAML has issued initial pricing guidance for the securitization of a €333.7m loan extended to Blackstone, with the weighted average bond coupon expected to fall around 300 basis points.

BAMLThe TAURUS 2016-1 DEU transaction is the securitization of a loan to Blackstone which financed the acquisition of a 55-strong retail-led property portfolio in Saarland and Rhineland-Palatinate.

Blackstone acquired the assets, dubbed the Kingfisher portfolio, from FMS Wertmanagement for circa €470m, financed with a €370.82m whole loan, provided by BAML, comprised of €333.74m senior and a €37.08m mezzanine loan.

BAML extended the senior loan and retained its 5% economic interest regulatory requirement in loan format, the senior loan has been subsequently securitised in the €317.05m TAURUS 2016-1 DEU transaction.

The capital structure – and initial pricing guidance – is as follows:

CLASS            SIZE    EXP. RATINGS        LTV    WAL   IPT  

  • A:         €141.6m  AAA/Aaa            30.1% 4.57     3mE+[140/150]
  • B:         €38.2m   AA(hi)/Aa3          38.3% 4.57     3mE+[mid 200]
  • C:         €25.5m   AA(lo)/A3            43.7% 4.57     3mE+[low 300]
  • D:         €41.8m   BBB/Baa3            52.6%   .57     3mE+[400a]
  • E:         €52.6m   BB/Ba3                 63.8% 4.57     3mE+[mid 500]
  • F:         €17.35m  BB(lo)/B2            67.5% 4.57     3mE+[m/h 600] 

Total:             €317.05m

Based on BAML’s “initial pricing thoughts”, the blended margin on the bonds would fall between 293.0 and 309.6bps over three-month Euribor. The median margin between these two sets of parameters would be 301.3bps, derived from the following assumptions:

CLASS            SIZE             IPT         Min assumption      Max assumption

  • A:         €141.6m         3mE+[140/150]        140             150
  • B:         €38.2m          3mE+[mid 200]       240             260
  • C:         €25.5m           3mE+[low 300]       310              340
  • D:         €41.8m          3mE+[400a]             390              410
  • E:         €52.6m          3mE+[mid 500]        540             560
  • F:         €17.35m         3mE+[m/h 600]       650             675

Blended bond margin:                                         293.0           309.6

Estimated running costs for the TAURUS 2016-1 DEU are approximately 11.5 basis points, comprised as follows:

  • Up to 5.5 bps for the £17.5m BAML Liquidity Facility, assuming 1% commitment fee;
  • Up to 3 bps in loan servicing, for which CBRE Loan Servicing has been mandated;
  • Up to 1.5 bps for rating agency fee, Moody’s and DBRS;
  • Up to 1.5 bps in corporate services fees, accounting fees and ancillary costs.

CoStar News understands that the loan margin on the original €333.74m BAML senior loan is 275 basis points. However, it is expected that BAML will break even on the deal, with an end of week close at around the 300 bps for the blended bond margin.

This is because BAML will have booked some pre-securitisation income from the warehoused loan, which was originated last September, which, plus loan arrangement fees, will likely make the transaction profitable in the round.

The underlying 55-strong property portfolio, spread over 496,936 sq m in 10 different federal states in Germany, was 92.8% occupied at the end last year and delivered €44.59m gross annual income.  The portfolio’s market value was €494.43m as at September 2015.

The portfolio was by predominantly leading German retailers as of the 31 December 2015 rent roll.

Additionally, the weighted remaining lease term for the portfolio is 6.9 years. compared to the remaining, with as much as €19.7m, or 44%,  of the property portfolio’s initial gross contracted rent due to expire during the term of the loan.

Blackstone’s business plan for the portfolio envisages investing €27m of capital expenditures on value-add maintenance and tenant improvements.

Blackstone has classified 49 properties as “core” (96% of the appraised value) and six as “tail properties” (4% of appraised value).

The rent roll is concentrated with exposure to the DIY retail and hypermarket industries with 17 properties occupied by DIY retail companies representing 38.6% of the in-place rent.

Additionally, the property portfolio as a whole is approximately 23.1% over-rented. The five largest retail tenants within the portfolio are leading German retailers, they comprise:  Globus REWE Group, Kaufland, Helios Kliniken and OBI, which together account for €30.47m, or 67.7% of annual portfolio rent.

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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