Brookfield Strategic Real Estate Partners is using a commercial-mortgage backed securitization to conduct a cash-out debt refinancing of its 1,000-room, ocean-front Diplomat Hotel in Hollywood, Fla.
The $460 million BFLD Trust 2019-DPLO will be secured by a two-year mortgage loan that will refinance $401.3 million of existing debt, plus pay $147.5 million of equity to Brookfield, according to Fitch Ratings. The payoff provides a return on the $91.6 million in renovations Brookfield has conducted at the hotel since acquiring it in 2014.
Net operating income has surged 85% since Brookfield bought the property, due to the renovations, according to Fitch Ratings.
Fitch has assigned an expected AAA rating to the $147.3 million in Class A notes, according to a presale report. Brookfield will market six subordinate term note classes as well, plus interest-only notes tied to the Class A tranche.
The loan includes three one-year extension options for a full extended five-year maturity. Brookfield and its hospitality affiliate, Thayer Hotel Investors VI, are the loan’s sponsors.
The hotel is located in the Miami-Fort Lauderdale-West Palm Beach metropolitan statistical area, and is managed under Hilton Management LLC’s Curio brand.
The mortgage loan was originated by Morgan Stanley, Wells Fargo and JPMorgan Chase.
The hotel, originally built in 1958, has two adjoining 39-story towers, and has 700 feet lengthwise glass wall overlooking the Atlantic Ocean.
The main risk to the property is its past experience with severe weather events. The hotel has been hit three times by named hurricanes, including the Category 4 Hurricane Irma in September 2017 that resulted in $8 million in total damage. Brookfield is required to maintain a minimum of $225 million in windstorm insurance and 18 months of business interruption insurance as part of its loan covenants.
