On December 28, 2010, Goldman Sachs and Citigroup teamed up on an $876-million CMBS transaction backed by 43 commercial mortgages they had recently originated. The deal, GS Mortgage Securities Trust, 2010-C2 was the most recent multiborrower CMBS transaction. The market awaits new CMBS issues from Deutsche Bank, UBS, Ladder Capital, Morgan Stanley, Bank of America and others in February.
Although the top loans in the issue capture a lot of attention, most mortgage bankers who originate commercial loans in the $3- to $10-million size range or assets outside the highly desired four asset groups of retail, office, industrial and multifamily might find sharing information on the bottom 10 loans (versus top 10) and non-traditional asset classes more useful.
The smallest loan in the pool is a $2-million loan on a shopping center in Westminster, MD. So small loans in CMBS are possible; however, the loan was 10% LTV/8x DSCR and is anchored by Petsmart. Of the smallest 10 loans 3 were Walgreens drug stores ($3.0 million, $4.5 million and $5.0 million), so Walgreens appear to be highly desired. In addition, a few other single-tenant credit loans appear in the bottom 10, including a Home Depot ($3.9 million) and a Best Buy ($6.0 million). The Walgreens sported DSCR in the 1.30-1.50x area, but the Home Depot and Best Buy DSCRs were > 2.0x.
An interesting bottom-10 loan is Amazing Spaces Storage. This $3.4-million loan is small and not in any of the four key asset groups. The loan has a 68% LTV and a 1.59x DSCR and the property is located in Houston, TX. Other interesting non-core-asset loans in the pool include four hospitality loans. Hospitality loans are the second-worst performing asset class in CMBS with a 14.3% delinquency rate as of December 2010, according to Trepp. The loans ranged in size from $12.5 million to $24.4 million and were secured by full-service hotels in major metro areas including New Orleans, LA; Spokane, WA; and Brentwood (a suburb of Nashville), TN. LTVs were 65%-75% and DSCR ranged from 1.50x to 2.25x.
“My takeaway on the bottom-10 loans in this pool is that small CMBS conduit loans can get done, but mainly secured by long-term leases to national credit tenants,” observed Michael D. Sneden, Executive Vice President of ValueXpress. “But it was encouraging to see hospitality and self-storage represented at LTVs and DSCRs that were not ultra-conservative.”