Harvest Commercial Capital is preparing to sponsor $218.5 million of commercial mortgage-backed securities (CMBS) through a series of Class A notes and several Class M notes in Series 2024-1 of the Harvest Commercial Capital Loan Trust.
According to DBRS Morningstar, the pool is comprised of small commercial mortgage loans originated by Harvest at fixed, fixed reset and adjustable interest rates. The pool includes loans originated under Section 504 of the Small Business Investment Act of 1958, which helped fund loans to small businesses primarily secured by first mortgages on commercial real estate (CRE) with initial terms of 30 years. The target audience is businesses with tangible net worth of less than $15 million, according to the rating agency.
The SBA loans account for 69 of the 114 loan pools, according to the ratings agency.
The mortgage pool initially has an aggregate initial principal balance of $174.8 million, according to DBRS analysts. Proceeds from the loans will be used to fund the purchase, construction, renovation and expansion of buildings and, in limited circumstances, can also be used to refinance loans.
Mizuho Securities and Robert W. Baird will be the initial purchasers and underwriters of the notes.
According to DBRS analysts, the transaction will be issued through a capital structure of seven senior and subordinated notes. This is also one type of credit enhancement in the transaction, the other being excess spread. The structure and credit enhancement are sufficient to support cumulative net loss rate assumptions of 30.8%, 22.5%, 16.5%, 12.6%, 8.9% and 6.0% for the AAA, AA, A, BBB, BB and B rating categories, respectively.
As of April 30, 2024, the pool's statistical cutoff date, the entire pool is comprised of commercial first lien CRE with personal guarantees from companies that have been in business for approximately 15 years, according to DBRS. The pool has strong credit characteristics overall. On a weighted average (WA) basis, the loans have an obligor FICO score of 748 and a current loan-to-value (LTV) ratio of 51.9%. The average loan balance is $1.5 million, according to DBRS.
Geographically, loans are concentrated in California, which currently accounts for 68.5% of the pool, followed by Florida, Oregon and Maryland at 5.51%, 4.60% and 3.72%, respectively.