RAIT Financial Trust said it closed on its fifth commercial real estate collateralized loan obligation.
The transaction, dubbed RAIT 2015-FL5, issued $263.6 million of investment grade notes with a weighted average cost of Libor plus 2.62%.
RAIT affiliates retained certain investment grade notes and all of the below investment grade and unrated subordinated interests totaling $83.8 million.
RAIT entered into the transaction to obtain nonrecourse, matched-term financing for the loans and participation interests serving as collateral. Barclays Capital Inc. acted as sole structuring agent. Barclays Capital Inc., Citigroup Global Markets Inc. and UBS Securities acted as co-lead and joint book-running managers.
The 31 loans in the collateral pool backing are secured by so-called transition properties. These are properties currently assessed as below investment grade but the sponsor has plans to stabilize and improve the asset value. Moody's Investors Service rates the assets an equivalent Caa1.
All of the loans were originated by subsidiaries of RAIT.
The pool is highly leveraged and the loans have a weighted average loan-to-value ratio, as calculated by Moody's, of 123%. Higher leverage exposes the pool to greater risk of default and higher overall loss severity should a default occur.
Trimont Real Estate Advisors will act as operating advisor, and RAIT, which originated all of the loans, will act as primary and special servicer for this transaction.
The portfolio is fully ramped but the structure has a two-year acquisition period during which the sponsor may purchase related future funding companion participations using proceeds from certain principal prepayments and repayments.
Moody's assigned a preliminary Aaa ratings to the class A notes that benefit from 44.25% subordination.
