Here’s one very large commercial mortgage that is not being carved up in to bits.
On July 7, BSHH LLC, an entity controlled by the Blackstone Group, obtained a $1.4 billion loan from Morgan Stanley, Bank of America, Citigroup, and JPMorgan Chase. Proceeds, along with an additional $281.5 million of mezzanine debt, were used to refinance approximately $1.6 billion of debt secured by a portfolio of 96 lodging properties with 12,447 keys.
Unlike some other very large loans, including some obtained by other Blackstone affiliates, this one is not being split into multiple notes and used as collateral for two or more conduits.
Instead, the $1.4 billion loan is being securitized in a single-borrower transaction, dubbed BX Trust 2017-SLCT, according to rating agency presale reports.
The floating-rate loan is structured with an initial two-year term and five, one-year extension options. The loan can only be extended provided there are no outstanding events of default. However, no loan-to-value ratio, debt service coverage of debt yield tests need to be achieved as a requirement for any extension, according to Kroll Bond Rating Agency.
The loan requires monthly interest only payments based on one-month LIBOR plus a spread of 2.0532%. There is no LIBOR floor.
[Blackstone did cash out some equity, but it was a relatively small amount, given the size of the finance package: $13.6 million.]
The portfolio consists of 55 extended-stay properties (57.1%), 40 limited-service properties (42.3%), and one full-service property (0.6%) located in 47 different metropolitan statistical areas in 24 states. The properties are operated under 11 national flags, and the five largest flags by portfolio balance are Residence Inn (34 properties, 38.9%), Hampton Inn & Suites (14, 14.3%), Homewood Suites (14, 12.8%), SpringHill Suites (10, 8.9%), and Courtyard (five, 6.6%).
Kroll puts the loan-to-value (KLTV) ratio of the loan being securitized at 98.4%, which it said is high for a single-borrower deal. It noted, however that this figure is consistent with the average KLTV of the lodging properties securitized in the 30 conduits rated by KBRA over the past 12 months of 98.4%.
Still, after taking into account the mezzanine debt not used as collateral for BX Trsut 2017-SLCT, the all-in KLTV is much higher, at 118.3%.
BX Trust 2017-SLCT 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 class. Kroll expects to assign an AAA rating to the senior tranche of notes.