UBS and Citigroup priced a $674-million CMBS transaction on December 9 that found strong demand. The AAA-rated super-senior bonds priced mostly in line with initial pricing guidance and at tighter spreads in most cases than comparable paper in the previous multi-borrower transaction — a $774-million offering by Cantor Fitzgerald that priced December 6. But spreads on the lowest-rated bonds widened from price guidance. The deal’s collateral was contributed by UBS (81.6%) and Natixis (18.1%).
The UBS-Citigroup offering is backed by 32 mortgages on 38 properties, with office properties representing 26.4% of the collateral pool, followed by retail at 22.5%. Hospitality properties were 15.4% of the collateral pool.
Three of the four super-senior classes priced in line with guidance. A $154.4-million tranche of 4.7-year bonds and $235.9 million of 9.7-year bonds both priced at 130 basis points (bp) over swaps. Meanwhile, $37 million of 2.6-year bonds sold at 80 bp. The other super-senior tranche — Class A-AB, with $44.4 million of 7.2-year bonds — exceeded guidance by 10-15 bp, pricing at 120 bp.
Among the subordinate bonds, the junior triple-A rated bonds, double-A rated bonds and single-A rated bonds also priced in line with guidance. But lackluster demand forced UBS and Citigroup to sell bonds rated Baa1/BBB (high) by Moody’s and DBRS at 725 bp, up about 50 bp from price guidance. And the paper rated Baa3/BBB (low) went for 950 bp, up about 150 bp from price guidance.
“The results of this offering are great news for CMBS borrowers and originators,” commented Michael D. Sneden, Executive Vice President of ValueXpress. “We are seeing an immediate decline in spreads to borrowers to the swaps-plus-350 area for a 10-year term, resulting in interest rates of about 5.6%, down from 6.00%-6.25% as recently as 30 days ago.”
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