Brookfield Real Estate Financial Partners is preparing a $1.0 billion single-asset commercial mortgage securitization, according to a presale report published by Standard & Poor’s.
The deal, dubbed BHMS 2014-ATLS Mortgage Trust, is backed by a $1 billion loan secured by the borrower’s fee interest in the 2,917-guestroom Atlantis Resort hotel in Paradise Island, Bahamas—an upscale, beachfront destination resort with water-park, marina, restaurants and spa. The mortgage loan is further secured by pledges of equity interests in several additional borrowers.
The loan is divided into a $350 million floating-rate component—with an interest rate of Libor plus 263 basis points—and a $650 million fixed-rate component with a 4.81% interest rate. The floating-rate components have a three-year initial term and fully extended maturity at seven years. The fixed-rate components have a seven-year term.
S&P assigned preliminary ratings to six tranches of notes to be issued by the securitization trust. The $67.76 million class D-FX notes and $36.49 million class D-FL notes were assigned BB+’ ratings, while the $81.53 million class E-FX notes and $43.90 million class E-FL notes were provisionally rated BB-.’ The $99.66 million class F-FX notes and $53.66 million class F-FL notes were rated B-.’
Among the deal’s strengths, according to S&P, is the fact that the property will be operated under a franchise agreement with Marriott International that was executed in June 2014 with a 20-year term.
Also, the borrower is responsible for expenses that would typically result in shortfalls to the those investing in the deal, such as special servicing, work-out, and liquidation fees, as well as costs and expenses incurred from the special servicer's appraisals and inspections.
Among the risks to the deal, S&P cited the fact that loan is interest-only for its entire seven-year extended term, which the rating agency views as a riskier than amortizing loans, because of the higher loan balance to be refinanced at maturity.
Also, the trust loan balance has a loan-to-value ratio of 89.9%, based on S&P's valuation, which is higher than most single-borrower transactions that is has rated recently.
Brookfield Real Estate Financial, a wholly owned subsidiary of Brookfield Asset Management, was founded in 2003. BREF has invested more than $3.0 billion over the past eight years.