Goldman Sachs is marketing nearly $1 billion of commercial mortgage bonds backed primarily by office and retail properties.
The $959 million GS Mortgage Securities Trust 2017-GS6 is less highly leveraged than other recent multiborrower transactions rated by Fitch Ratings, with a debt service coverage ratio of 1.32x and a loan-to-value ratio of 98.8%. By comparison, the average conduit rated by Fitch this year had a DSCR of 1.22x and an LTV of 104.5%
However, the pool's overall leverage metrics are boosted by a single loan, 1999 Avenue of the Stars, which, though unrated (Fitch has published a credit opinion), has investment-grade like characteristics. This loan accounts for 9.96% of the entire pool.
It's hardly the only large loan in the pool, which is more concentrated than other recent Fitch-rated multiborrower transactions. It has only 33 loans (versus an average of 48 year to date) and the largest 10 comprise 66.3% of the pool (versus an average of 53.5% for the year to date).
The largest property-type concentration is office at 64.4% of the pool, followed by retail at 19.6% and industrial at 10.6%.
Amortization is also low. Overall, the pool is scheduled to pay down by 5.32%, which is worse than the YTD 2017 and 2016 averages of 8.1% and 10.4%, respectively.
In order to comply with rules requiring that someone keep skin in the game, an affiliate of Goldman will retain a "vertical" interest in a portion of each tranche of securities to be issued, while a third party, KKR Real Estate Credit Opportunity Partners Aggregator I, will purchase and retain the most subordinate tranches of securities; together, these Goldman and the KKR fund will retain 5% of the economic interest in the deal.
Goldman's deal hits the market following a week in which spreads on newly issued commercial mortgage bonds widened modestly at the top of the credit stack, while those at the bottom continued to tighten, according to research published by Trepp Monday.
Two deals backed by a single asset or a portfolio held by a single borrower priced last week. One was anchored by a portfolio of 87 hotels, and the other was backed by a Manhattan office tower at 75 Broad Street.