Goldman Sachs has launched a jumbo commercial mortgage-backed securities single-borrower deal backed by a $520 million mortgage on a portfolio of Sunbelt multifamily assets. Atlanta-based ECI, which operates a roughly 7,000-unit portfolio, is the sponsor.
A portion of the proceeds of GSMS 2022-ECI, along with about $105 million of subordinate mezzanine financing and another $24 million of sponsor equity, will be used to refinance existing debt. Additionally, the sponsor will buy about $206.8 million of family member and other interests, with capital also allocated to closing costs.
The collateral backing the deal includes 13 buildings in Georgia, Florida, Tennessee and Texas, with about 3,478 units. The deal carries an initial term of two years, with three one-year extension options as well as an interest rate cap.
Fitch has a largely positive outlook on the transaction, citing in a pre-sale report the prime location and upkeep of the properties and ECI’s strong track record of multifamily management. The agency, however, cited high leverage as a concern and noted debt of about $149,511 per unit. This translates into a Fitch DSCR of 0.80x, with an LTV of 110.1%.
“Five properties are recently built assets, constructed between 2018 and 2021, and reflect a more modern standard of Class A multifamily properties,” the report stated. The remainder are older assets, with ECI using a portion of proceeds for renovations.
Despite positive fundamentals in the portfolio, the agency is still broadly cautious on the CMBS market due to concerns over inflation and stagnant economic growth indicators.
“All of Fitch’s 2022 US CMBS property sector outlooks are neutral,” the report states.
The agency recently downgraded multifamily as well as other sectors to reflect “deterioration in Fitch’s macroeconomic outlook and mounting headwinds anticipated through 2023,” the report added.