The Blackstone Group is tapping the commercial mortgage bond market yet again, but this time it is for acquisition financing, and not a cash-out refinancing.
Blackstone Real Estate Partners VIII, an affiliate of the private equity group, has obtained a $215 million mortgage from Goldman Sachs; proceeds, along with $72 million of equity, were used to acquire the Ritz-Carlton Kapalua, a luxury resort located in Maui, Hawaii, for $275 million and to pay closing costs.
This loan, which has an initial term of two years and can be extended by one year up to five times, pays only interest and no principal. It is being used as collateral for a mortgage bond offering called GS Mortgage Securities Corporation Trust 2018-LUAU.
Fitch Ratings considers the Ritz-Carlton Kapalua to be an “A-” quality property. The resort overlooks Maui’s D.T. Fleming Beach and has access to two championship golf courses (which are not collateral for the securitization trust). Property amenities include approximately 226,000 square feet of multipurpose indoor and outdoor event space, pool, spa, fitness center, seven food and beverage outlets, retail space and tennis courts.
The hotel is one of only four resorts in Hawaii to earn the AAA Five Diamond designation in 2018.
Moreover, the property has benefited from approximately $36.2 million in capital expenditures since 2014, which equates to approximately $91,000 per sponsor-owned guestroom. These improvements include guest room and residential suite renovations, upgrades to the cabanas and pool as well as a lobby renovation.
However, the transaction is also highly leveraged, in Fitch’s view. The rating agency puts the debt service coverage ratio at 0.59x and the loan-to-value ratio at 177.8%, respectively.
Fitch is only rating the senior, Class A notes, which benefit from 76.8% credit enhancement and are rated AAA. It is not rating any of the subordinate tranches.
