ORIX USA Closes $350 Million Commercial Real Estate CLO Platform

ORIX Corporation USA (ORIX USA), the U.S. operating division of global financial services firm ORIX Corporation (ORIX), announced the closing of OREC 2018-CRE1, a $350 million commercial real estate (CRE) collateralized loan obligation (CLO). Initially backed by a portfolio of 23 loans secured predominantly by newly constructed properties, the CLO includes many loans originated for agency takeout through one of ORIX USA’s wholly owned affiliates. The CRE CLO is a natural extension of ORIX USA’s comprehensive platform, with a fully integrated asset management and servicing group.

The initial pool consists of $299.4 million in existing commercial mortgages that were originated between 2014 and 2018 (12 in the past year), plus a $50.6 million funded reserve for assets to be acquired during the 120-day ramp-up period. Following closing, there is a 2 1/2-year reinvestment period. The majority of the assets are in a pre-stabilization phase awaiting refinancing through a permanent agency takeout loan through Fannie Mae, Freddie Mac or the Federal Housing Administration (FHA).

“Three wholly owned ORIX USA affiliates contributed to our first managed commercial real estate CLO, leveraging ORIX USA’s 35 years of capital markets knowledge and commercial real estate industry expertise,” said Hideto Nishitani, ORIX USA chairman, president and CEO. “RED Capital Group, ORIX Real Estate Americas and Lancaster Pollard each originated loans for the CLO. Several loans were originated by RED Capital Group to drive business at another wholly owned affiliate, Boston Financial Investment Management, reinforcing our commitment to the affordable and seniors housing sectors. Given ORIX USA’s wherewithal, we elected to retain the AA rated through the nonrated income notes on our balance sheet and offer only the AAA-rated class.”

All of the loans are serviced by RED Mortgage Capital. Seven classes of notes were issued; however, the only offered class of notes was the $190.3 million Class A notes, which were rated Aaa(sf) and AAA(sf) by Moody’s Investors Service Inc. and Kroll Bond Rating Agency Inc., respectively. The Class A notes benefit from 45.625 percent credit enhancement at closing and priced at a coupon of 118 basis points over one-month LIBOR.

Fourteen of the loans representing 62.3 percent of the initial collateral pool are backed by multifamily properties, which include residential and student housing properties. Four of the loans comprising 17.1 percent of the initial collateral pool are secured by private-pay senior assisted living facilities, with most of these assets anticipated to be permanently financed by Fannie Mae or FHA through an ORIX affiliate in the future. In addition to multifamily properties, the initial collateral pool also contains loans backed by self-storage, retail and one hotel with a stabilized appraised loan to value of only 40.3 percent.

J.P. Morgan Securities LLC acted as sole structuring agent and lead placement agent for the transaction. Wells Fargo Securities LLC served as co-lead manager, and Citi acted as co-manager for the offering.