- What A $550.3m conduit issue is being marketed to investors
- Why The deal comprises loans on industrial, retail, hotel, multifamily and office properties
- What’s next The offering is slated to price in the coming week
Canada’s first conduit CMBS offering in more than a year is making the rounds with investors.
RBC Capital Markets is the structuring agent, with bookrunning assists from BMO Capital, Casgrain & Co., CIBC, Laurentian Bank and National Bank Financial. All the loans were contributed by CMLS Financial. The deal is expected to price next week.
The $550.3m deal, off the Canadian Commercial Mortgage Origination Trust shelf, encompasses 28 loans on 39 properties. By sector, the issue comprises loans on industrial (46%), retail (27.4%), hotel (17.2%), multifamily (5%) and office (4.4%) properties.
The average loan is $19.7m, and the weighted average remaining term is 53 months with an average of 21 months seasoning. The appraised loan-to-value ratio by net cashflow is 49.7%, and the weighted average debt-service coverage ratio is 1.55 to 1.
Only the class A notes are being offered (CCMO 2024-6). The $424.5m super-senior tranche is rated AAA by Morningstar DBRS and has a weighted average life of 3.02 years.
The last CMBS issue in Canada, off the same shelf, priced in December 2022. That $494.5m deal, CCMO 2022-5, comprised 35 loans on 52 properties. Its $75m super-senior tranche priced at 200 bps over the yield on Government of Canada bonds.
In the current offering, the largest concentration comprises five cross-collateralized and cross-defaulted mortgages on five full- and extended-service hotels totaling $94.6m of the trust balance, or 17.2% of the pool.
The borrower is Vancouver-based SilverBirch Hotels & Resorts, which owns 17 hotels across Canada. Including portions that were not securitized, the loans total $158.5m, which refinanced $133m of existing debt and returned $25.5m of equity.
The collateral properties are the 201-room Residence Inn Vancouver Downtown, the 410-room Delta Hotels Ottawa City Centre, the 238-room DoubleTree by Hilton West Edmonton, the 127-room Home2 Suites by Hilton West Edmonton and the 225-room Delta Hotels Bessborough, in Saskatoon.
The hotels’ weighted average occupancy was 77.7% at yearend, though the individual occupancies ranged from 47.1% to 89%.
The second largest concentration, at $51.9m, or 9.4% of the pool, stems from a loan on a portfolio of four industrial properties and one mixed-use property in three Montreal submarkets. Olymbec, a Montreal-based real estate firm owned and operated by brothers Derek Stern and Richard Stern, is the borrower.
The properties were 96% occupied as of January by 18 tenants. The largest is Pantos Logistics Canada, which leases 198,000 sq ft, or 23.1% of the portfolio’s total space. By leased area, the next three are: Enterprise Rent A Car Canada (19.3%), Les Entreprises Getpaq (19.1%) and Armstrong World Industries Canada (8.9%).
A loan on grocery-anchored retail centre Brighton Marketplace in Saskatoon is the third largest in the conduit deal. It represents $51.7m of the trust balance, or 9.4% of the pool. Dream Asset Management and Wilson’s Retail own the property in a 50/50 joint venture.
Anchored by Save On Foods, the center was built between 2018 and 2023. One free-standing pad will be completed this year, bringing the total square footage to 200,000. Tenants include Landmark Cinemas, Motion Fitness, Dollarama and the Key Steakhouse.