After a summer in which CMBS bond demand was relatively weak, resulting in widening of spreads, the first deal to price after Labor Day flew off the shelf. The deal, a $757.3-million multi-borrower offering by UBS and Bank of America, priced the benchmark class at 117 basis points (bp) over swaps, lower than initial price guidance of 120-122 bp and inside the 120-bp level achieved on the comparable class of the previous conduit issue, which priced in August.
The issue featured an unusually low 59.2% loan-to-value ratio and high-quality top five loans. The largest loan in the issue has a principal balance of $72,884,027 and is secured by Charles River North, an eight-story medical office condominium containing 354,594 square feet of space located in Boston, Massachusetts. The space is 100% occupied by Massachusetts General Hospital under the terms of a long-term lease that expires in 2029. Massachusetts General Hospital is rated AA by Fitch and S&P. The second-largest loan is a $70-million loan secured by a 26-story, 441,922-square-foot Class B office building located on 5th Avenue in New York City. The third-largest loan is a $70-million loan secured by a 341-room full-service Westin Hotel located in Austin, Texas.
“This CMBS offering has terrific credit metrics compared with recent offerings,” said Michael D. Sneden, Executive Vice President at ValueXpress. “With spreads widening during the summer and a great credit profile against a backdrop of generally deteriorating underwriting, we thought it would be a great opportunity to buy some bonds. But others had the same idea and the AAA-rated AS Class that we purchased was four times oversubscribed so we only received a fraction of our order and the yield was 10-15 basis points lower than we anticipated.”