Morgan Stanley, UBS launch pair of CMBS conduits totaling $1.4B


Morgan Stanley and UBS launched a pair of conduit commercial mortgage securitizations totaling over $1.4 billion Monday, as issuers raced to clear their books by the end of the year.

The $646.5 million UBS 2018-C15 is backed by 41 loans secured by 317 properties, some of which have investment grade characteristics that help reduce the overall leverage in the transaction. The largest is Great Value Storage Portfolio, which represents 8.5% of the portfolio and is considered by Kroll Bond Rating Agency to be AAA quality; Moody’s Investors Service views it as Aa1. The portfolio consists of 64 self-storage properties that together comprise 30,811 units or 4.1 million square feet located in 10 states within a mix of primary (46.4% of total base rent), secondary (35.1%) and tertiary (18.5%) markets that were constructed from 1954 to 2002 and are 35 years old on average.

The other property with investment grade characteristics is a portion of a larger loan on the Christiana Mall in Newark, Del., which Kroll considers to be AA+ quality and Moody’s sees as A1; it accounts for 1.5% of the assets in the collateral pool. (A larger portion of the loan was securitized in BBCMS 2018-CHRS, a single-asset commercial mortgage securitization.)

Moody’s identifies two other loans as having investment grade qualities: Saint Louis Galleria loan (7% of the pool balance, Baa2) and the Five Points Plaza loan (1.7%, Baa3), which is secured by borrower’s fee simple interest in a 123,370-square-foot office building in Atlanta.

The overall pool has a weighted average loan-to-value ratio, as calculated by Kroll, of 93.6%; that’s below the average of 96.9% for the 24 CMBS conduits Kroll rated in 2018, which ranged from 85.4% to 104.1%.

Both Kroll and Moody’s Investors Service expects to assign triple-A ratings to the super senior tranches, which benefit from 30% credit support; there is also a senior support tranche with 21.875% credit enhancement that is rated AAA by Kroll and Aa2 by Moody’s.

MSC 2018-H4 is a $796.8 million CMBS conduit securitization collateralized by 50 loans secured by 115 properties.

The overall pool has a weighted average in-trust loan-to-value ratio, as calculated by Kroll.

This deal has a single loan with investment grade characteristics, a portion of a mortgage on Aventura Mall, a super-regional mall in Miami is the second largest loan in the pool, accounting for 7.5% of the total collateral. Kroll considers it to have the characteristics of an AA- loan, when analyzed on a standalone basis. (The bulk of this loan was securitized in Aventura Mall Trust 2018-AVM, a single-asset securitization.)

Kroll views diversity of property types favorably, and this transaction has exposure to all of the major property-type segments, with the top three being office (30.0%), retail (24.6%) and lodging (19.4%).

Kroll expects to assign an AAA to the super senior tranches, which benefit from 30% credit support, as well as to a senior support tranche with 21.125% support.

New issuance has slowed amid recent market volatility. Last week, a single commercial mortgage securitization priced, according to Trepp: the $891.9 million BBCMS 2018-C2. While it printed slightly outside of prior guidance — the last cash flow triple A tranche pays 99 basis points over swaps — participants were heartened that spreads did not widen even more. Organized by a team from Starwood and Barclays, the hybrid conduit deal features a $55 million loan against the 165-unit Dream Inn hotel in Santa Cruz, Calif., as its largest asset.

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