Single-Sponsor Execution

Transcription

1 Single-Sponsor Execution Ideal for those sponsors who desire flexible, customized financing for a portfolio of loans and/or have the financial capacity to purchase a structured bond that can effectively reduce the cost of first mortgage capital Highly customizable loan terms, which may include collateral substitution, fixed- and floating-rate loan products, as well as other features that give the sponsor flexibility Sponsor may purchase a discounted subordinate bond, which, when combined with the additional annual cash flow stream and redemption of these bonds at par, effectively reduces the cost of the loan The Servicing Standard, designed to create a better borrower experience, is in effect through the entire loan term both before and after securitization Loan Options and Requirements Eligible Products Terms Index All product types currently offered by (e.g., conventional, seniors, student, Targeted Affordable, etc.) Up to 30 years; fixed rate, floating rate, or a mix of both Fixed-rate: US Treasury Securities; floating-rate: 1-month LIBOR index Lock Options Standard early rate-lock option available for varying durations, typically ranging from 60 to 120 days until purchase; Index Lock and standard delivery are also available Supplemental Loans Recourse Requirements Reserve Escrows Prepayment Provisions Interest-Only Period Available subject to requirements specified in s underwriting guidelines; additional loan-level or aggregate loan-to-value (LTV), debt service coverage ratio (DSCR) and net operating income tests may be required Loans are non-recourse except for standard carve-out provisions; guarantor may be waived for low-leverage pools Tax, insurance and replacement reserves are generally required, subject to standard underwriting criteria Variety of prepayment options available Full- or partial-term interest-only available Choice of crossed or uncrossed loans July 2015

2 Pool Options and Requirements Pool Size Collateral Substitutions Assumptions Releases from Subordinated Bond Purchase Deposit Generally $300 million or greater Permitted to allow the sponsors to manage their properties as business needs change Available for un-crossed pools (fixed- and floating-rate); assumptions on a crossed pool may be permitted on a case-by-case basis Permitted subject to minimum pool-level LTV/DSCR thresholds for remaining, unreleased loans; see the Single-Sponsor Execution: An Example below for releases with and without a loan paydown Typically required from subordinated bond purchasers Single-Sponsor Execution Features 1 Examples Description Benefits Subordinated Bond Purchase Collateralized Pool and Substitution A sponsor of a loan portfolio purchases a bond equal to 10-15% of the total pool amount; bond is subordinate, first loss, nonguaranteed and unrated; bond s coupon can be a fixed or floating rate, based on underlying loans Yield on subordinate bond based on current coupon and discounted purchase price, yield and discounted payoff; calculated using standard bond equivalent yield assuming no loans default and no prepayments A sponsor executes a cross-collateralization agreement whereby each property in the pool secures all of the loans in the pool; with low leverage, this can serve as a borrowing base giving the sponsor the ability to substitute collateral that meets the DSCR and LTV requirements Cash flow from the subordinate bond offsets debt service payments, effectively lowering the borrowing cost on the underlying mortgage loans; see Single Sponsor Execution: An Example below Subject to Real Estate Mortgage Investment Conduit (REMIC) requirements; crosscollateralization comes with substantial flexibility regarding substitution of assets out of the pool, after securitization Page 2

3 Examples Description Benefits Releases from Acquisition of a large portfolio could require a diverse disposition strategy; crossed pools can be a mix of fixed- and floating-rate loans to suit different exit scenarios; below a 65% LTV, any property can be released from the crossed pool upon an assumption or loan payoff Release with loan paydown Release of property out of a crossed pool permitted after related loan is paid off including any prepayment premium, provided remaining assets support minimum LTV/DSCR thresholds Release without loan paydown Release of property for lowleverage pools without a loan paydown permitted, provided remaining assets support minimum LTV/DSCR thresholds after the release Legal and other applicable fees will apply Provides the sponsor with freedom to implement a variety of buy/hold strategies in a pooled securitization context, subject to REMIC requirements as the Master Servicer or Special Servicer has obtained ratings for its asset management capabilities: For master servicing, an initial commercial mortgage-backed securities (CMBS) rating of CMS2 from Fitch Ratings the highest initial rating ever assigned by Fitch for a master servicer and a rating of Above Average from Standard & Poor s For special servicing, a CMBS rating of CSS2- from Fitch Ratings and MOR-CS2 from Morningstar Credit Ratings 1 Any one facility may have various combinations of features, including, but not limited to the above. is committed to preserving postsecuritization servicing quality and ensuring the continuity of s Servicing Standard to ensure the borrower s satisfaction, even for non-performing loans Single Sponsor Execution: An Example 2 Description: $300 million crossed portfolio of 10 assets located in four regions with an average LTV of 75% and a DSCR of 1.25x. Substitution: Only available for crossed pools. B-Piece Purchase with Implied Benefit: Loan Pool Subordinate Bond Pool Size ($) 300,000,000 Pricing Yield (BEY) 10% Term 10 year Size (% of pool) 10% Amortization 30 Year Sub Bond Face Value ($) 30,000,000 LTV / DSCR 75% / 1.25X Price (disc. From 100) Gross Coupon ($) 4.84% Purchase Price ($) 19,047,000 Annual Debt Service ($) 18,975,091 Annual Coupon Income ($) 1,430,250 Annual Debt Service Net of Coupon Income $ 17,544,841 Implied Loan Cost (IRR) 4.91% Implied Loan Cost w/ Sub Bond Yield (IRR) 4.37% Implied Benefit (IRR) 0.53% Page 3

4 Release from without Paydown or Payment of Prepayment Premiums: Pool-level LTV improved from 75% to 67% and DSCR improved from 1.25 to 1.45 after the second year. Borrower can release an asset from the existing portfolio without a paydown. The released asset is removed from the securitization trust and can be re-levered at full credit parameters. This effectively increases the lending capacity for the borrower without having to take out supplemental financing. The remaining pool will have a portfolio of nine crossed assets. Loan Pool After Release Released Property With New Debt Pool Size ($) 300,000,000 Loan Size ($) 35,000,000 Number of Assets 9 Number of Assets 1 Remaining Term 8 year Term 10 year Remaining Amortization 28 Year Amortization 30 Year LTV / DSCR 75% / 1.25X LTV / DSCR 75% / 1.25X Gross Coupon ($) 4.84% Gross Coupon ($) 4.84% Effective Combined Debt Outstanding ($) 335,000,000 Effective Combined Gross Coupon 4.84% 2 Rates and yields are for illustration purposes only. Securitization Deal Parties: Roles and Responsibilities Primary Servicer(s) Master Servicer Special Servicer Trustee Operating Trust Advisor -approved Seller/Servicer who originates the loans and may service them until maturity To be selected by ; may also be Steps into role of Lender. Collects loan payments from Primary Servicer(s) and remits funds to Trustee. Approves performing loan modifications, insurance waivers, assumptions, etc. To be selected by the Sponsor and must be approved by ; may also be Services defaulted loans and resolves defaulted loan issues Special Servicer cannot be economically affiliated with the Sponsor To be selected by Enforces securitization documentation and remits payments to all bondholders To be selected by the Sponsor and must be approved by ; may also be Responsible for certain loan approvals and periodic review of the Special Servicer. May recommend removal of the Special Servicer for failure to perform its duties To be selected by Responsible for underwriting the securitization transaction and placing bonds with investors Page 4

5 Guarantor Rating Agencies guarantees principal and interest security payments on the senior part of the capital structure (the guaranteed underlying and the ), monitors loan performance and retains certain consent rights on the underlying loans To be selected by, if applicable Typical Securitization Structure (Loan Seller) Loans sold to affiliate and subsequently deposited into the REMIC Trust Mortgage Loan Trust (REMIC Trust) issues underlying acquires guaranteed underlying and issues Unguaranteed subordinate underlying sold to Broker/ Dealer Syndicate places with Investors At settlement, a qualified investment entity established in accordance with the requirements of the will purchase the subordinate bond for a cash purchase price Investors Subordinate bond buyer For More Information Contact Denise Hogan, Director, at or denise_hogan@freddiemac.com or David Quadt, Associate Director, at or david_quadt@freddiemac.com. Page 5