Talk about a cash out refinancing.
Blackstone plans to securitize the senior portion of a five-year, $2 billion, floating-rate loan backed by its Motel 6 loan portfolio.
Motel 6 Trust 2015-MTL6 will issue $1.8 billion of securities; proceeds will be used to refinance $1.3 billion of debt, fund $75.0 million in upfront reserves for future capital expenditures, pay loan closing costs of $11.8 million and return $603.8 million of equity to Blackstone, according to Kroll Bond Rating Agency.
JP Morgan Securities and Deutsche Bank Securities are lead underwriters.
The loan backing the deal is secured by 493 extended stay hotels and a pledge of cash flow from 14 hotels. The collateral also includes the equity interests in entities that own certain current and future franchise assets and certain intellectual property including the Motel 6 brand.
These same properties also collateralize $200.0 million of mezzanine portion that is not being securitized.
Blackstone originally acquired its Motel 6 portfolio from Accor S.A. in October 2012 for approximately $1.9 billion. Financing for that transaction included a $1.0 billion mortgage that was securitized in the Motel 6 Trust 2012-MTL6 CMBS transaction.
Since Blackstone acquired the Motel 6 portfolio in 2012, the number of franchised hotels has increased by 28% to 699 from 547 and franchise earnings grew by about 58% to $13.4 million in 2014 from $8.4 million in 2012, according to Kroll.
Kroll plans to rate the class A notes AAA’, the class B notes AA-, the class C notes A-, the class D notes BBB-, the class E notes BB- and the class F notes B-. It calculates the loan-to-value ratio of the deal at 91.3%; when the mezzanine debt is taken into account, this leverage rises to 101.4%, however.
Standard & Poor’s plans to assign AAA’ ratings to the class A notes but will not rate the subordinate tranches. S&P’s LTV calculations are slightly higher at 98.2% without the mezzanine portion and 109% with the extra $200 million of junior debt included. Higher leverage implies lower borrower equity levels and higher default probability.
Blackstone's Motel 6 portfolio includes 468 properties that operate under the Motel 6 Flag, 38 extended-stay economy properties operating as Studio 6 hotels and one hotel operating under the Red Roof Inn flag, according to Kroll. The Red Roof Inn was acquired in 2002 and can’t be converted to a Motel 6 flag because it is located in a protected territory with other third party owners of Motel 6 assets.