Gagfah pulls off €2bn CMBS in biggest post-crash issue

Larger-than-expected deal refinances German multi-family resi assets

Gagfah has issued the largest new CMBS to be publicly sold since the financial crisis.

The German property company closed a €2bn CMBS transaction on 20 June to refinance part of its German multi-family housing portfolio at average pricing across five tranches of 2.76%.

Gagfah, which is majority-owned by US private equity group Fortress, issued German Residential Funding 2013-1 (GRF) to repay €2bn of debt due to mature in August 2013, secured on almost 62,000 properties.

The securitisation is much larger than originally expected – earlier this year Gagfah had said it would refinance about half the €2bn with a mix of German and international banks and insurance companies.

But after months of work, these lenders lost that business. Gagfah’s change of plan was due to the run-away success last month of 2013’s first CMBS issue, also secured on German multi-family property owned by Gagfah (see more).

That deal, the €1.07bn Taurus 2013 GMF1, was heavily oversubscribed and achieved very competitive pricing, with a blended margin on the five tranches of about 150 basis points for a 60.3% loan-to-value level; the pricing for the €710m of class A bonds was 105bps.

Pricing for GRF ranged from 115bps for the €1.24bn of AAA-rated class A notes (up to 43% LTV); to 350bps for the €274m of BBB-rated class Ds (54-62%); and 410bps for the €103m of BBB-rated class Es (62-65%).

Pimco is believed to have been a substantial investor in the new issue. GRF is an agency deal, meaning Gagfah, rather than a bank, took the execution risk. Goldman Sachs and Bank of America Merrill Lynch were the joint lead managers.

The deal’s pricing was more costly than Taurus, but yields rose on news that the US Fed is to cut back quantitative easing.

Gerald Klinck, Gagfah’s chief financial officer, said: ‘We saved 1.56% compared to the previous coupon of 4.32%. The amortisa­tion rate is 0.5%, which will improve our LTV level over time.”

Chief executive Thomas Zinnocker added: “Refinancing under such attractive conditions allows us to fully concentrate on our core business again.”

The loan will mature in 2018 and the CMBS has a six-year ‘tail’ period to final maturity of the notes in 2024. It was rated by Fitch and DBRS.