JPMorgan’s SASB deal gives investors a piece of Manhattan’s Solow Building

JPMorgan Chase is marketing the $900 million JPMCC 2016-NINE Mortgage Trust transaction, secured by a single, 10-year interest-only loan backed by the 50-story 9 West 57th Street trophy office tower in Midtown, Manhattan.

JPMorgan Chase’s $900 million JPMCC 2016-NINE Mortgage Trust, a single asset-single borrower (SASB) transaction on the 50-story Solow Building in Midtown, Manhattan, comes at a time when such deals have become few and far between amid a depressed CMBS market.

Though SASB deals don’t give investors the diversification of a conduit deal, they have traditionally lured those who want a piece of a Class A or trophy property and relatively high returns.

But the number of SASB deals, as well as their dollar volume, has shrunk significantly along with the rest of the CMBS market. The JPMCC deal, secured by a 10-year interest-only loan on the 1.7 million sq ft office property known for its distinctive sloping facade, follows just 23 SASB transactions issued during the first eight months into this year, compared to 59 total deals last year and 56 in 2014.

Solow Building
Solow Building

Trepp’s latest numbers on SASB CMBS deal volume show that total issuance of such deals has only topped $10.3 billion so far this year, compared to $31.2 billion total last year and $23.7 billion in 2014.

Fitch and Moody’s both assigned two of the JPMCC deal’s three classes ‘AAA’ ratings earlier this month. Huxley Somerville, managing director and head of Fitch Ratings’ US CMBS group, told Real Estate Capital that while the agency is rating fewer SASB deals, it is also less concerned about the high leverage in this particular market, as average debt ratios have declined.

The average loan-to-value (LTV) on SASB transactions has averaged 52.9 percent so far this year, compared to 57.9 percent last year and 59.2 in 2014, according to Trepp. This could be an added draw for investors as deal flow slows, though the JPMCC deal at the Solow tower had a loan-to-value of 60 percent.

Though the property also has a relatively low occupancy rate of 63.5 percent, well below the submarket’s occupancy of 90.1 percent, it houses high-quality tenants like Chanel and Apollo Global Management Holdings — and its vacant space has sizable income potential due to the building’s quality, views, and proximity to Central Park, according to Fitch.

Proceeds of the loan were used to refinance existing debt, fund reserves, pay closing costs and return$485 million of equity to the building’s ownership, headed by real estate developer Sheldon Solow.