A US$107.68m CMBS transaction this week funded a small portion of a US$3bn bank loan that financed a sale-leaseback transaction last year on two Las Vegas casinos – the MGM Grand and Mandalay Bay.
BX Commercial Mortgage Trust 2021-VIV5, which was led by Société Genérale and priced on Monday, was the fifth SASB issued over the past year that was backed by a piece of the original loan. The offering was marketed and allocated to a select group of investors before it officially priced, according to two buyside sources.
Citigroup, Barclays, Deutsche Bank and Société Générale originated the jumbo MGM-Mandalay loan for the deal between Blackstone and MGM Growth Properties and began securitizing it in May 2020. Originally, the banks had intended to package US$1.9bn of the loan in a single SASB offering in March 2020, but the deal was pulled when the Covid pandemic forced a two-month shutdown of the city's casinos.
The banks have been selling the CMBS debt in pieces rather than one large deal to allow it to be more easily absorbed by investors who remain cautious about the recovery of the Las Vegas casino industry since the pandemic, market participants said. The banks now plan to package the rest of the loan into conduit offerings, according to Moody's.
"They got pinched by Covid which came on so strong. They have leaked it into the market instead of one big deal," a senior portfolio manager said.
The Triple A rated single-class offering carried a weighted-average life of 8.40 years and priced at swaps plus 100bp.
Each successive "VIVA" deal has drawn more interest because it was backed by a more senior part of the loan. The previous transaction sold in December, BX 2020-VIV4 Trust, was backed by a US$550m piece of the US$1.634bn "aggregate A-notes," which are senior to the loan's US$430.1m "senior B-notes;" US$374m "junior B-notes" and US$561.4m "aggregate C-notes."
The remaining US$968.4m that has not been securitized yet is composed entirely of A-notes and will be included in various conduit deals, Moody's said.
The latest "VIVA" transaction arrived in advance of an expected US$3bn CMBS backed by a loan tied to MGM's US$3.9bn sale and leaseback deal with Blackstone on its Aria Resort & Casino and Vdara Hotel and Spa. JP Morgan, Morgan Stanley, Citigroup and Wells Fargo are expected to announce the offering in October, according to a source familiar with the deal.
Another mega casino CMBS might arrive by year-end to finance the US$5.65bn sale of The Cosmopolitan, which a Blackstone real estate arm sold to a group comprised of Blackstone's REIT, private equity firm Stonepeak Partners and the Cherng Family Trust – the family office of Andrew Cherng who co-founded restaurant chain Panda Express. MGM is expected to ink an operating agreement to run the casino.
Blackstone declined to comment about its CMBS funding strategy for its casino deals.
