A joint venture of real estate investment groups is launching a new billion dollar commercial-mortgage backed security (CMBS) that pools loans to multifamily properties in growing cities, mainly in the South.
The $1.2 billion BX Trust 2021-Rise offering comprises 17 Class A and B multifamily properties constructed between 1984 and 2017, according to DBRS Morningstar in a Nov. 17 pre-sale report.
The provisional rating for $442.2 million and $108.0 million tranches is ‘AAA’; an $80.3-million tranche is ‘AA’; an $82.2-million tranche is ‘A’; a $147.9 million tranche is ‘BBB’; a $82.5 million tranche is ‘BB’; $98.2 million tranche is ‘B.’
The sponsor is a joint venture of experienced real estate investment groups, BREIT and Cortland, Morningstar says.
Single-family home construction also increased across communities of all sizes, but notably in outlying metro areas.
While September's single-family starts were unchanged from the prior month, multifamily activity fell 5%, according to government data.
Growing CRE mortgage volumes raised the bar for the coming year despite lingering concerns, according to the CRE Finance Council.
Goldman Sachs Bank, Bank of America and Societe Generale Financial are the mortgage loan sponsors. The depositor is GS Mortgage Securities Corp II, and the master server is KeyBank National Association.
The sponsors got the portfolio through multiple acquisitions from May through October. “Following the recapitalization, they will have $640 million of cash an implied market equity in the properties based on the “as-is” portfolio appraisal value of $1.8 billion,” DBRS says,
Among DBRS’s concerns is that the coronavirus pandemic makes all commercial real estate properties risky. Although the long-term effects on the overall economy and consumers still aren't clear, the rating agency expects multifamily assets will do better than most commercial properties.
A strength of multifamily properties is that they have staggered lease rollovers and lower expense ratios. “Although revenue is quick to decline in a downturn because of the short-term nature of the leases, it is also quick to respond when the market improves,” DBRS says.
As of October, the portfolio had a weighted average occupancy of 95.4 %.
The properties are located in high-growth markets with demands for multifamily housing. The weighted average submarket vacancy rate is 4.9% and in-place rents are 2.9% below current submarket rents.
There are 6,410 units across seven states and in cities including Charlotte; San Antonio; Tampa; Mesa, Arizona; Raleigh, North Carolina; and Atlanta.
The deal is estimated to close on Dec. 15.
