Citigroup placed a record deal on the market this week: the bank priced the largest multifamily-focused Commercial Mortgage-Backed Securities (CMBS) transaction issued by a single bank since the Global Financial Crisis (GFC). Dubbed Citigroup Commercial Mortgage Trust 2026-MFAM1, the transaction is a pure multifamily conduit deal comprising 27 five-year, interest-only loans across 27 properties.
The aggregate principal amount of this transaction totals USD 816.9 million, with 100 per cent of the loans provided by Citi Real Estate Funding. According to data from Trepp, this deal not only marks the largest single-bank initiated multifamily conduit deal since the GFC but also appears to be the largest single-bank loan contribution in a conduit deal post-Covid pandemic.
For comparison, in 2016, the GSMS 2016-GS4 transaction included single-bank contributions of just over USD 1.2 billion. Further back, J.P. Morgan was the sole mortgage loan seller in two conduit deals in 2011: the USD 1.5 billion JPMCC 2011-C3 and the USD 1.47 billion JPMCC 2011-C4 transactions.
The AAA bonds of the Citigroup Commercial Mortgage Trust 2026-MFAM1 were priced early this week at swaps plus 80 basis points (bps), which is 8 bps below the last cash flow AAA tranche of the JPMF1 Multifamily Mortgage Trust 2026-FX1 transaction priced in May. In the latter deal, which was also 100 per cent multifamily, MF1 Capital acted as the mortgage seller for 100 per cent of the loans, totalling USD 734 million.
Insiders from Citi indicated that the bank identified and deliberately addressed a market gap and corresponding interest for medium to high leverage loans on high-quality multifamily products. Although the bank was exposed to a certain market risk with the pool, it was fully committed to this programme and adhered to the terms during the execution of each individual loan. This led to a smooth progression of the entire transaction.
According to Fitch Ratings, the average Fitch loan-to-value (LTV) of the Citi deal is 123.4 per cent, which is higher than the five-year averages for multi-borrower loans in the 2026 and 2025 deals – these weighed 102 per cent and 101 per cent respectively. Compared to the Freddie Mac Seven-Year K7 Series rated by the agency between 2023 and 2026, which had an average Fitch LTV of 115.7 per cent, the current value is also higher. While Citi regularly competes with agencies in the multifamily loan sector, a higher leverage point combined with interest-only loan structures is understandably attractive to borrowers in the current market.
Stephen Buschbom, Head of Applied Research and Analytics at Trepp, noted that the volume of amortising loans in agency pools has noticeably decreased in recent years, indicating a very competitive lending environment. Regarding the advantage of buying bonds from a private label deal like Citi's compared to a Freddie Mac K-Series deal, Buschbom explained that this is partly due to the structuring and an additional yield benefit. He added: "Given that the top 10 loans account for over 50 per cent of the collateral, and the risk of buying AAA-minus or AA-minus rated bonds is very low, I would feel very comfortable with the Citi and J.P. Morgan pools, especially if I achieve a higher yield compared to an equivalent Agency CMBS."
Although the Citi deal exclusively comprises multifamily loans, it offers geographical diversification. The properties are spread across core and primary markets, with New York, Los Angeles, and Florida being the top three markets. Buschbom emphasised that he appreciates the broad diversification of loans across various sponsors, as this is an advantage for bond buyers. Currently, single-asset and single-borrower deals account for approximately three-quarters of all private label CMBS issuance, forcing borrowers to take on concentration risks either by borrower or property type. Buschbom commented: "With this multifamily conduit deal, I gain more diversification in one fell swoop."
Multifamily properties, which have always been considered favourites in investment portfolios, are solidifying their value. Buschbom highlights that the US is structurally undersupplied with housing, leading to a robust floor for valuations, provided one is comfortable with the top 15 loans in these pools.
