This week, CRED iQ reviewed the commercial real estate lending landscape and highlighted five properties that secured financing in April 2022. The highlighted loan originations feature five different property types \u2014 mixed-use, industrial, retail, lodging and self-storage. The largest featured recent origination is secured by a mixed-use property located in the Los Angeles MSA.<\/p>\n\n\n\n
Using the CRED iQ platform\u2019s Comps functionality, which features propriety Comps scoring for the CRE loan universe, we compared lending terms and loan structures to get a sense of the trends in the CRE lending environment. The impacts of a rising rate environment this month as most new originations have comparatively higher interest rates then their most relevant comps.<\/p>\n\n\n\n
CRED iQ additionally provided valuations for each asset to evaluate leverage levels in relation to originators\u2019 LTVs. The CRED iQ valuations factor in base-case (most likely), downside (significant loss of tenants), and dark scenarios (100% vacant). Base-case valuations for select properties are provided below. For access to the valuation reports as well as full CMBS loan reporting, including detailed financials, updated tenant information, and borrower contact information, sign up for a free trial here<\/a>.<\/p>\n\n\n\n The Reef<\/strong><\/p>\n\n\n\n 806,960 sf, Mixed Use (Office\/Retail), Los Angeles, CA<\/strong><\/p>\n\n\n\n A $150 million loan was originated by Deutsche Bank on April 13, 2022 to refinance existing debt on The Reef, a mixed-use property in Los Angeles, CA. The interest-only loan had a 10-year term and was structured with an interest rate of 5.425%. The loan will be locked out from prepayment for two years, and defeasance will be permitted after lockout through the remainder of the loan term until its open period, five months prior to maturity.<\/p>\n\n\n\n Using CRED iQ\u2019s Comps functionality, one of the most comparable originations is a loan secured by the Pershing Square Building<\/a>, a 153,381-sf mixed-use building located approximately 1.5 miles north on South Hill Street. The interest-only loan has a balance of $44 million and was originated in May 2017. The comparable loan\u2019s interest rate was 4.64%, which is 79 bps lower than the new origination for The Reef.<\/p>\n\n\n\n The Reef is a 12-story mixed-use building in Downtown Los Angeles that contains office and retail showroom space. Most notable about the building is the property\u2019s LED signage, which covers three sides of the building\u2019s top floors and totals approximately 41,000 sf. The LED signage is positioned strategically for view by vehicular traffic on I-10 (Santa Monica Freeway) and I-110 (Harbor Freeway). The LED signage is licensed to a third-party operator that shares 75% of the net profit with the borrower, paying a minimum license fee of approximately $2.7 million per year. Based on the originator\u2019s underwritten financial statements, LED signage accounted for 40% of the property\u2019s effective gross income. The high concentration of income from LED signage, which can fluctuate based on contracted amounts to the third-party operator, presents credit risks from potential disruptions of the effectiveness of the LED advertisements. Temporary limitations to visibility, obstructions of view, or loss of power are all events that could result in lower income from the building\u2019s LED signage. The building\u2019s office space was 78% leased as of February 2022.<\/p>\n\n\n\n The property was appraised at a value of $349 million ($432\/sf) as of November 11, 2021. The appraisal resulted in an LTV of 43%, and an implied cap rate of 5.53% based on the originator\u2019s underwritten NCF. The debt yield came in at 12.9%, also based on NCF from the originator\u2019s underwriting. For the full valuation report and loan-level details, click here<\/a>.<\/p>\n\n\n\n