This article is from the Australian Property Journal archive
CB Richard Ellis indirect subsidiary, CBRE Realty Finance, has announced the closing of a $US1.0 billion collateralised debt obligation, CBRE Realty Finance CDO 2007-1, LTD.
The offering is the second CDO issuance by the New York listed CBRE Realty Finance, Inc. since its inception.
The majority of the proceeds were used to retire outstanding borrowings under existing secured repurchase agreements. The remainder of the proceeds will be used to make additional investments.
The total collateral value of the commercial real estate portfolio securing CDO II will be $US1.0 billion.
The collateral consists of first mortgage loans, B Notes, mezzanine loans, and commercial mortgage-backed securities. CDO II has a ramp-up period of nine months from the date of closing during which it can contribute up to $212 million of additional assets.
The structure contains a five-year reinvestment period during which the Company can use the proceeds of loan repayments to fund new investments. CDO II has an expected weighted average life of 8.2 years and at issuance, a weighted average interest rate on the $880 million of investment grade securities of approximately three-month LIBOR plus 40 basis points, excluding transaction costs.
Chief executive Keith Gollenberg said the CBRE Realty Finance is extremely pleased with the overall execution of CDO II.
“The CDO issuance adds an additional $880 million of long-term financing to our balance sheet with extremely attractive borrowing costs and flexibility. This execution further supports our business strategy, our growth objectives and enhances our leveraged returns on equity.”
CBRE Realty Finance Management, LLC, the external advisor of the Company, will serve as the Collateral Manager of CDO II.
The company sold $880 million of investment grade bonds to third parties and retained all of the $120 million of non-investment grade bonds and common equity.
Standard & Poor’s, Moody’s Investors Service and Fitch Ratings have awarded a AAA rating to $650 million, or approximately 65%, of CDO II.
Standard & Poor’s, in March of 2007, evaluated the asset management practices of the Collateral Manager and granted the Collateral Manager its Qualified CDO Special Servicer designation.
The Company will treat the transaction as a financing and therefore consolidate all of the assets, liabilities, income and expenses of the CDO II issuer on its balance sheet and income statement. All contributed collateral will be shown as assets and the investment grade securities issued to third- party investors will be shown as direct liabilities.
The securities being offered have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
Australian Property Journal
