News and Deals of Ashford Trust, CalPERS, CalSTRS, Canyon Partners, Donahue Schriber, Global Net Lease, JPMorgan, NYSTRS, RCLCO, RXR, SLGreen, and more
Newly established REIT VICI Properties Inc., formed out of the bankruptcy restructuring of Caesar’s Entertainment, has completed a $1.6 billion refinancing of its flagship property – Caesars Palace in Las Vegas.
JPMorgan Chase, Morgan Stanley, Goldman Sachs & Co. and Barclays Bank were the lenders. The loan carries a fixed interest of 4.36% and has been folded into a new CMBS offering (Caesars Palace Las Vegas Trust 2017-VICI.)
VICI collects an annual base rent of $165 million over the initial seven years of the Caesar’s lease term. Net cash flow for the property is estimated to $231.5 million, according to Kroll Bond Rating Agency (KBRA), which rated the CMBS offering.
MBA Forecasts Elevated Commercial/Multifamily Originations from 2017 to Continue in 2018
The Mortgage Bankers Assn. (MBA) projects commercial and multifamily mortgage originations will end the year at $515 billion, up 5% from the 2016 volumes, and it expects volumes to remain at roughly that level in 2018.
MBA forecasts mortgage originations of multifamily mortgages alone to be $235 billion in 2017, with total multifamily lending at $271 billion. After strong growth in 2017, multifamily lending is expected to moderate slightly in 2018, according to the MBA.
“Commercial and multifamily markets remain strong, even as many growth measures are exhibiting a bit of a downshift,” said Jamie Woodwell, MBA’s vice president of commercial real estate research. “Property values are up 6% through the first 8 months of this year. Despite a decline in property sales transactions, commercial and multifamily mortgage originations were 15% higher during the first half of this year than a year earlier. We expect stable property markets and strong capital availability to continue to support mortgage borrowing and lending in 2018.”
Commercial/multifamily mortgage debt outstanding is expected to continue to grow in 2017, ending the year roughly six% higher than at the end of 2016.
CMBS Financing Completed for SL Green, RXR’s Worldwide Plaza Purchase
Goldman Sachs Mortgage Co. and German American Capital Corp. completed a $705 million CMBS offering backing SL Green and RXR’s purchase of a combined 48.7% interest in One Worldwide Plaza at 825 Eighth Ave. in Midtown Manhattan. New York REIT, the seller, retained controlling interest in the property.
Worldwide Plaza Trust 2017-WWP is backed by the borrower’s interest in the 1.8 million-square-foot, 47-story Class A office building. The property is 98.4% leased and has served as the headquarters for the law firm Cravath Swaine & Moore since 1997 and as the North American headquarters for Nomura Holdings since 2012, according to S&P Global Ratings, which rated the offering.
Its current base rent for office tenants is $65.60 per square foot as calculated by S&P Global Ratings. In comparison, its West Side office submarket has a Class A office vacancy rate of 7.7%, and gross asking rent was $82.28 per square foot as of second-quarter 2017.
The mortgage loan is steeply leveraged with a 91.5% loan-to-value (LTV) ratio, based on S&P’s valuation. The LTV ratio based on the appraiser’s valuation is 54%. S&P’s estimate of long-term sustainable value is 41.1% lower than the appraiser’s valuation. The mortgage loan is interest only for its entire 10-year term.
In addition to the first mortgage debt, there is additional debt in the form of three mezzanine loans totaling $260 million.
Ashford Trust Completes Refinancing of 17-Hotel Portfolio
Ashford Hospitality Trust Inc. (NYSE: AHT) refinanced a mortgage loan with an existing outstanding balance totaling $413 million that had came due in December 2021. The new loan totals $427 million and is expected to result in annual interest savings of $9.8 million.
The loan is secured by seventeen hotels: Courtyard Alpharetta, Courtyard Bloomington, Courtyard Crystal City, Courtyard Foothill Ranch, Embassy Suites Austin, Embassy Suites Dallas, Embassy Suites Houston, Embassy Suites Las Vegas, Embassy Suites Palm Beach, Hampton Inn Evansville, Hilton Garden Inn Jacksonville, Hilton Nassau Bay, Hilton St. Petersburg, Residence Inn Evansville, Residence Inn Falls Church, Residence Inn San Diego and Sheraton Indianapolis.
“The early execution of this refinancing provided us with an attractive opportunity to address a future maturity as well as achieve substantial savings in annual interest payments,” said Douglas A. Kessler, Ashford Trust’s president and CEO. “When combined with our other refinancings and preferred redemptions completed this year, we expect to realize annual savings of approximately $13.7 million.”
CalPERS Expands Relationship with Canyon Partners Real Estate
The California Public Employees’ Retirement System (CalPERS) has allocated $350 million of new capital to Canyon Partners Real Estate’s Canyon Catalyst Fund (CCF) through its real estate emerging manager program.
CCF currently invests in office, retail, industrial, multifamily and mixed-use projects in urban markets across California, with investments in 27 assets across the state. While remaining committed to investing in California, CCF plans to expand its geographic focus to include the Phoenix, Seattle and Portland metro areas, and also plans to invest in the self-storage and student housing sectors.
CalPERS has partnered with five emerging managers including Rubicon Point Partners, which, under the direction of Ani Vartanian, has invested over $170 million in six office transactions in the San Francisco Bay area’s tech corridor. The other four investment managers working with CalPERS are Pacshore Partners, a Southern California-focused creative office owner-operator; Paragon Commercial Group, which specializes in neighborhood-serving retail; Sack Properties, a statewide multi-family manager; and most recently, BKM Capital Partners, which targets multi-tenant industrial investments.
CalSTRS Selects RCLCO as Investment Committee Real Estate Consultant
The California State Teachers’ Retirement System Investment Committee has selected RCLCO as the committee’s new real estate consultant. The current contract, held by the Townsend Group, expires in February 2018. The Townsend Group has served the investment committee for the past nine years.
“Retaining the services of specialty consultants, like RCLCO, is not only a board policy requirement, but is significant to the performance of our fiduciary responsibilities,” said investment committee chair Harry Keiley. “During the interview process, RCLCO impressed upon us that they add perspectives from operators in the industry, which will incorporate fresh insights to future strategic and policy discussions.”
RCLCO will work for the Teachers’ Retirement Board’s investment committee and with CalSTRS investment staff to monitor and comment on the real estate portfolio performance and policy matters. However, they are specifically excluded from recommending any individual investment opportunity.
JPMorgan and NYSTRS Commit $200 Million to Donahue Schriber
Donahue Schriber Realty Group (DSRG), a privately-held REIT that owns grocery-anchored shopping centers, has received a $200 million equity investment from institutional investors advised by J.P. Morgan Asset Management and from New York State Teachers’ Retirement System (NYSTRS). Each have provided $100 million in capital.
“We will be utilizing the additional $200 million equity investment to expand our existing portfolio throughout Coastal California and the Pacific Northwest,” said Patrick S. Donahue, chairman and CEO.
Since 2011, J.P. Morgan Asset Management-advised investors and NYSTRS have invested a total of $650 million of growth capital with Donahue Schriber. The privately-held REIT owns and operates over $3 billion in retail shopping center assets.
Sabal Closes Small Balance Multifamily Debt Fund
Sabal Investment Advisors LLC held a final close of its first private capital vehicle, the SIA Debt Opportunities Fund with total commitments of $200 million exceeding its initial target of $150 million.
Led by Pat Jackson, chief investment strategist, the fund is a medium duration private capital vehicle. A core component of the fund will be to invest in securitizations created by the Freddie Mac Small Balance Lending program focused exclusively on multifamily properties that are fully stabilized, senior secured, low LTV, current cash flowing loans between $1 million and $7.5 million.
The fund secured commitments from several institutional investors including the University of Michigan’s endowment, AZ Public Safety Personnel Retirement System pension, a major Midwest hospital plan, a Japanese insurance company, a RE specialist advisor who brought a large southwest public pension plan, as well as a multi-employer ERISA plan, a Midwest family office and a NY based family office and advisory firm.
Global Net Lease Executes $187 Million CMBS
Global Net Lease Inc. closed on a new commercial mortgage-backed facility yielding gross proceeds of $187 million. The CMBS facility carries a fixed interest rate of 4.37% and a 10-year maturity in November 2027, encumbering a pool of 12 U.S.-based assets.
GNL expects to use proceeds to pay down $120 million outstanding under its credit facility, for general corporate purposes and maintains flexibility to make future acquisitions. The CMBS facility extends the company’s weighted average debt maturity from 3.1 years to 3.9 years, while also locking in a fixed interest rate for the next 10 years.