DEC 4, 2013 3:24pm ET

Single-Borrower CMBS Backed by New York Property Heading to Market


A commercial mortgage-backed security linked to a single borrower in New York’s Garment District, is in the pipeline, according to Kroll Bond Rating Agency presale report.

The $450 million deal is called VNDO 2013-PENN. UBS Real Estate Securities originated 60% of the first-lien mortgage backing it. Wells Fargo Bank NA originated the other 40% of the loan.

Eleven Penn, which houses the corporate office of Macy’s, secures the loan. Macy’s covers over 54% of the building’s total square footage. The department store’s leases in the building run through April 2035. Also leasing out space at Eleven Penn are AMC Networks and Madison Square Garden. MSG’s arena is just west of the building.

Kroll gave a $243.5 million A tranche a preliminary rating of triple-A(sf). This is Kroll’s highest rating of this type. Other tranches were unrated, including a B piece for more than $54 million and a C tranche for more than $40 million.

The cash-flows to investors will come from fees on the more than 1 million square foot building. The loan has a coupon of slightly less than 4%, a seven-year term and borrowers pay monthly on an interest-only basis. Office space occupies 980,717 square feet of Eleven Penn, retail businesses use up 31,014 square feet, and storage space takes up 86,905 square feet. The building went through a renovation in 1981 and an expansion in 2012. It contained 15 tenants as of November.

The deal is part of a refinancing by Vornado Realty Trust.

Citigroup and Wells Fargo separately plan to market a $295 million CMBS deal that is backed by 16 hotels; 15 of the hotels are affiliated to major brand hotels that include Marriott, Sheraton, Holiday Inn, SpringHill Suites and Residence Inn by Marriott.

Collateralizing the deal, CGWF Commercial Mortgage Trust 2013-RKWH, is an interest-only, floating-rate loan that has an initial two-year term and provides for three, one-year extension options.

There also is a $55 million senior mezzanine loan and a $50 million junior mezzanine loan.

Standard & Poor’s has assigned its top rating of triple-A to the class A notes, its lower double-A-minus rating to the class B notes, its A-minus rating to the class C notes, its triple-B-minus rating to the class D notes and its double-B-minus rating to the class E notes.

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