CMBS: Tesco turns back the clock

The European securitization market witnessed that rarest of things in June – primary issuance in the real estate-backed securitization market. And commercial real estate-backed at that. Tesco Property Finance 1 is a £430.6 million ($703.1 million) single-tranche deal backed by retail properties that are subject to 30-year bondable occupational leases with Tesco Stores, the UK’s largest supermarket chain. But this deal is very far from what the market had come to understand as CMBS. It is a straightforward sale-leaseback transaction where the bonds are linked to lease payments guaranteed by Tesco. As such the deal is more of a corporate securitization, linked to the credit quality of Tesco itself, not the value of the underlying properties. It was also clearly targeted at long-term institutional buyers – with a final maturity of 2039 – rather than the traditional ABS investors of old. The deal was arranged by Goldman Sachs. ...