Bank of America Merrill Lynch is marketing $615 million of commercial mortgage bonds backed entirely by extended stay hotels and select service properties, according to Kroll Bond Rating Agency.
The deal, BAMLL 2014-INLD, is backed by a single loan co-originated in November by Bank of America (70%) and Column Financial (30%) that was used to help . The proceeds, along with $202 million of mezzanine financing, were used to help fund the $964.3 million purchase of the 48 property portfolio by two publicly traded REITs, Northstar Realty Finance and Chatham Lodging Trust from the prior owner, Inland American Real Estate Trust.
The loan pays a floating rate of interest, has a two-year term that can be extended for one year up to three times, for a total of five years, and does not amortize.
It is secured by fee simple interest in 46 lodging properties and the leasehold interest in two other assets. The properties are located in 31 different metropolitan statistical areas in 21 states.
The securitization trust will issue nine classes of certificates, six of which are entitled to principal and interest, two of which receive interest only and one of which is a residual interest.
Kroll assigned an AAA’ rating to the senior classes.
Among the deal’s strengths, according to Kroll, is the strong franchises of the hotels in the portfolio; all are affiliated with national chains under the Hilton, Hyatt, Marriot and Starwood brands; and the positive operation performance trends of the properties.
Among the deal’s weaknesses, is the amount of leverage. The “in-trust” loan-to-value is 95.3%, which Kroll described as “high in the context of a single borrower CMBS.” And that’s before taking into account the mezzanine financing secured by same properties, which puts the “all-in” LTV, as measured by Kroll, at 126.7%.
