Greystone returns with a $450 million CLO secured by commercial real estate

Greystone 2021-HC2 prepares to launch a $ 450 million collateralized loan obligation (CLO)

The underlying property types are focused on facilities that support seniors, according to a pre-sale report by the Kroll Bond Rating Agency. Nursing properties make up the majority of the portfolio with 51.9%, followed by assisted living (16.3%), assisted living and memory maintenance (11.4%), assisted living and nursing staff (9.2%) and assisted and independent living (7.3.). %) to round off the five most important property sub-types.

JP Morgan Securities, Goldman Sachs & Co., Wells Fargo Securities and UBS Securities are placement agents in the transaction, according to KBRA.

Key structural features of the transaction include a 180 day ramp-up period during which $ 46.5 million in cash can be used. This is below the average of 17.6% of cash that can be used by 14 other CRE CLO transactions that KBRA has assessed over the past 12 months.

The transaction also has a reinvestment period of 36 months. All reinvestment assets selected for the trust must be healthcare property and be intended for refinancing with the proceeds of a mortgage loan at the time of their creation.

KBRA advises that this type of reinvestment function can result in negative credit migration and increased concentration over the life of the securitization, which can present a credit challenge.

KBRA expects to assign Classes A and AS an ‘AAA’ rating, issuing bonds of $ 183.3 million and $ 15.7 million, respectively. The A class has 59.2% obedience and the AS class 55.7%, KBRA said.

For the remainder of the transaction, the Notes are expected to receive ratings of ‘AA-‘ to ‘B-‘.

The Greystone transaction is backed by 26 sponsors and the 37 properties have an initial weighted average maturity of one year. The property’s loan-to-value is 76.1% on a fully funded basis, according to KBRA, and the transaction has a debt service coverage ratio of 1.64x.

The majority of the loans, 92.9%, have extension options that can be exercised provided certain conditions set out in the loan documents are met.