North America MBS Issue: Gramercy Property Trust's US$3bn CMBS

IFR Awards 2018
3 min read
Joy Wiltermuth

The leveraged buyout of Gramercy Property Trust by Blackstone for US$7.6bn was the largest take-private of a REIT in 2018, one of the biggest such trades in the last decade – and it went off without a hitch.

Despite the deal’s huge size, Blackstone Real Estate Partners VIII was able to raise the bulk of its funding in the commercial property debt markets in October, with a massive US$3bn CMBS sale, a US$1.6bn syndicated mortgage and mezzanine loan and a US$464m asset sale bridge loan.

“It’s unique in that it was three different executions that were concurrent,” said David Bouton, a co-head of Citigroup’s CMBS and loan originations group, who was lead-left on the debt financing and an M&A adviser on the buyout.

“We raised US$12bn of demand for a US$3bn CMBS.”

Securitisation of single-asset and single-borrower loans made up a bigger share of the CMBS market in 2018 than the more traditional conduit business, where 70 or so property loans are bundled into one bond deal.

And real estate investors have kept funding big property deals from well-known borrowers such as Blackstone, even as some parts of the market have begun to look late-cycle.

The price of mid-town Manhattan office properties fell 8% over the past 12 months after the bid for trophy properties from Asia-Pacific dried up, according to data from Real Capital Analytics.

But there was no shortage of demand for the riskier parts of the Gramercy financing, with both the mezzanine portion of the securitisation and its mortgage loans placed with a mix of high-quality pension and debt fund investors.

“A lot of CMBS investors had been wanting to see a larger CMBS deal come to market,” said Kenneth Cohen, US head of commercial real estate finance at Bank of America Merrill Lynch, a co-lender on the transaction.

“But much more than the bonds, themselves, it was one of the first times that we’ve seen a deal post-crisis generate the type of interest.”

All classes of the securitisation priced below expectations and 37 out of 66 total investors bought its Triple As, according to Citigroup data.

The portfolio is 97.4% occupied and spans 46.4m square feet across 22 states.

Morgan Stanley advised Gramercy and Eastdil Secured acted as the REIT’s real estate consultant. Citigroup and Bank of America Merrill Lynch were Blackstone’s financial advisers.

A Blackstone-led consortium owns a 55% stake in the company that owns IFR.

To see the digital version of IFR Awards 2018, please click here.

To purchase printed copies or a PDF of IFR Awards 2018, please email