Greystone 2021-HC2 is preparing to launch a $ 450 million secured loan obligation (CLO) secured by 27 whole loans on commercial healthcare real estate (CRE).
The underlying property types are concentrated in facilities that help the elderly, according to a presale report by rating agency Kroll Bond. Qualified nursing establishments constitute the majority of the portfolio, with 51.9%, followed by assisted living facilities (16.3%), assisted living facilities and memory care (11.4%), -services and skilled nursing (9.2%) and assisted-living and independent residences (7.3%) to complete the five main property subtypes.
JP Morgan Securities, Goldman Sachs & Co., Wells Fargo Securities and UBS Securities are placement agents on the transaction, according to KBRA.
Key structural features of the deal include a 180-day ramp-up period, during which $ 46.5 million in cash can be used. This falls within the average 17.6% of cash available for use among 14 other CRE CLO transactions that KBRA has noted in the past 12 months.
The transaction also has a 36 month reinvestment period. All reinvestment assets chosen for the trust must be healthcare property and, at the time of creation, must be intended for refinancing with proceeds from an agency mortgage loan.
The KBRA notes that this type of reinvestment feature can lead to negative credit migration and increased focus on the duration of the securitization, which can be a credit challenge.
KBRA plans to assign “AAA” ratings to Classes A and AS, which will issue $ 183.3 million and $ 15.7 million of notes, respectively. Class A has 59.2% subordination and Class AS 55.7%, KBRA said.
During the remainder of the trade, the ratings should be assigned ratings ranging from “AA-” to “B-“.
Twenty-six sponsors are behind the Greystone transaction, and the 37 properties have an initial weighted average remaining life of one year. The loan-to-value ratio of appraisals on the properties is around 76.1% on a fully funded basis, and the deal has an issuer debt service coverage ratio of 1.64x, according to KBRA.
The majority of loans, 92.9%, have extension options which can be exercised provided certain conditions specified in the loan documents are met.