Goldman, Morgan reviving CMBS activity with new deals

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Goldman Sachs and Morgan Stanley are backing a revival of new commercial mortgage-backed securities activity, in two deals that deftly avoid hotel or department store retail assets that are most exposed to pandemic-related stresses.

Both deals are the first public offerings to institutional investors since Credit Suisse sponsored a $748 million deal that priced on March 11, and are being launched as investors are growing weary of potential short-term and long-term concerns about COVID-19-related tenant delinquencies.

In April, the CMBS delinquency rate rate jumped 22 basis points to 2.29%, representing the largest increase since 2017, according to data firm Trepp.

Goldman and Morgan are the main sponsors for a $771.9 million conduit transaction of 29 commercial real estate loans across 60 office, multi-family, industrial and self-storage property types.

One of the loans in the Goldman-Morgan deal – dubbed GSMS 2020-GC47 – is a partial interest is a Class A office building in Los Angeles that Morgan is also marketing through a separate single-asset commercial-mortgage securitization also being launched this week, according to presale reports.

The $330 million Morgan Stanley Capital (MSC) I Trust 2020-CNP is secured by a major portion of the $550 million whole loan for City National Plaza, which had a new 10-year mortgage recently underwritten by Goldman and Morgan. City National Plaza, a 52-story twin-tower landmark in downtown Los Angeles built in 1972.

City National Plaza, Los Angeles

The 10-year City Plaza Loan is represented by nine Class A, pari passu notes. The majority of them were split between the two CMBS transactions: five assigned to the single-borrower MSC 2020-CNP deal and one notes totaling $50 million apportioned to GSMS 2020-GC47.

The remaining $170 million in notes are to be assigned to future CMBS transaction, according to a presale report from Kroll Bond Rating Agency.

The building is currently 84.1% occupied, with the largest tenancy (17.2% of the base rent) belonging to the headquarters of City National Bank. But ratings agency reports caution that none of the current 22 retail tenants are open at City National Plaza due to the COVID-19 outbreak. Further, three large tenants (law firm Paul Hastings and two restaurants) have been granted short-term rent relief totaling $1.5 million, and nine other tenants are in negotiations for forbearance.

The GSMS 2020-GC47 transaction features participations in mortgages for assets that have been included in prior CMBS deals: a New York Class A office building at 1633 Broadway; three buildings of the Moffett Towers high-tech office complex in the San Jose, Calif., region.; and the 650 Madison Avenue office/retail building in New York.

GSMS 2020-GC47 will offer 19 classes of certificates, including 12 receiving principal and interest payments. Five of the term tranches benefit from 30% credit enhancement and have preliminary triple-A ratings from Kroll Bond Rating Agency and Fitch Ratings. S&P Global Ratings has assigned early AAA ratings to four of the senior-term tranches.

The single-asset MSC 2020-CNP deal has four classes of term notes topped by a $2242.49 million Class A notes tranche in the capital stack. The notes have preliminary AAA ratings from Kroll and Fitch. Morgan Stanley's trust will also offer an interest-only tranche of notes proportional to the senior notes.

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CMBS Morgan Stanley Goldman Sachs CRE