JPMorgan issued $485 million in CMBS backed by 72 shopping centers owned by Centro Properties. The 10-year loan amortizes on a 30-year schedule and carries a 6.27% interest rate. The underlying loan included $89 million of subordinate financing. The largest allocated loan balance ($40.4 million) was secured by Rockland Plaza, a 251,000-square-foot shopping center located in Nanuet, NY. The allocated balances for the remaining collateral properties ranged from $650,000 to $25.5 million. The loan was underwritten with a 1.78 DSCR and a 58% LTV. The debt yield approximated 12.2%.
The CMBS was structured with five classes. Class A1 and A2 were rated AAA by three agencies. The $70-million Class A1 pays interest plus principal from amortization on the underlying loan such that the class is scheduled to pay off just prior to loan maturity. The class A1 CMBS sold at $101 to provide a yield of 3.1%. The A2 Class has a 10-year expected life and sold at $101 to provide a yield of 4.3%. The $43.4-million Class B CMBS, rated AA, sold at $100 to provide a yield of 5.1%. The $38.6-million Class C CMBS, rated A, sold at $100 to provide a yield of 5.5%. The $60.5-million Class D CMBS, rated BBB-, sold at $97 to provide a yield of 6.2%.
“According to our calculations, the weighted-average coupon paid to bondholders was about 4.55%,” noted Michael D. Sneden, Executive Vice President at ValueXpress. “This represents a healthy spread of 172 basis points (bp) between the rate paid the bondholders and the 6.27% paid by borrowers. This converts to a nice profit for JPMorgan.”
It is also encouraging that subordinate financing was available to bridge the likely gap between the CMBS loan proceeds and the loan payoff. This source of financing will become increasingly important on future transactions on properties that cannot qualify for full loan payoff at maturity.