Goldman Sachs has restructured its €182.25m REITALY CMBS and is reassessing its price guidance as it relaunches the transaction.
The deal is the securitisation of a single €191.5m loan to Apollo Global Management for a portfolio of 25 Italian retail assets.
Goldman tried to launch the deal in June but delayed it before pricing. The bank declined to comment on the reason for the delay but fears in June surrounding the Greek crisis, the number of Italian CMBS deals already in the market, the poorer quality of some of the properties and the transaction’s initial guide pricing, have all been suggested.
Goldman has now split the transaction’s original Class A notes into a €70m Class A1 and a €39.3m Class A2, which carry expected Fitch ratings of A+ and A respectively. Fitch had assigned an expected rating of A to the original €109.3m Class A notes in REITALY.
The new structure with expected Fitch ratings is as follows:
Class A1 €70m A+sf 25.2% LTV
Class A2 €39.3m Asf 39.3% LTV
Class X1 and X2 €0.3 NR
Class B €33.3 BBBsf 51.3% LTV
Class C €12.4 BBB-sf 55.8% LTV
Class D €17.7m BBsf 62.1% LTV
Class E €9.25m BB-sf 65.5% LTV
The splitting of the Class A tranche does not de-risk the deal in any significant way but it does allow Goldman to now market the CMBS with an expected top rating of A+. A reassessment of the price guidance could also lead to more investors taking part.
REITALY will be the seventh Italian CMBS to be launched post-crisis. It follows two others arranged by Goldman, in 2013 and 2014 (Gallerie 2013 and Moda 2014), one last year from Deutsche Bank (DECO 14 – Gondola) and three this year, from Banca IM/Cairn Capital, Bank of America Merrill Lynch and French bank BNP Paribas.
Goldman provided the original loan to Apollo’s Italian REITALY fund which is managed by AXA Real Estate Investment Managers and which bought the assets, originally for €290m of equity, from Olinda Fondo Shops, a listed fund managed by Prelios. The five-year loan is subject to a 20% amortisation target by 2018 and 30% by 2019, due to be met by asset sales.
The portfolio comprises five large retail assets, each with a cinema, five cash-and-carry properties, three retail galleries, five retail warehouse and seven shops. They are located across Italy and have a combined market value of €292.3m.
In its pre-sale report, ratings agency Fitch said UCI Cinemas Group provides 21% of the total rental income and the portfolio includes its Milan flagship, the Pioltello IMAX complex.
However, Fitch said the transaction was also exposed to relatively high-risk leisure tenants and varying property quality including some dilapidated assets.
The portfolio also contained an element of re-letting risk as half the current rental income expired by loan maturity in 2020, as well as loan level weaknesses including “the lack of borrower obligation to indemnify the lender for enforcement costs”, according to Fitch, which could lead to a loss on the junior notes.