Citigroup and BofA Merrill Lynch are lead underwriters on a $257 million of commercial mortgage bonds backed by a floating-rate loan that is secured by two hotel properties, according to Morningstar.

The collateral for CGBAM Commercial Mortgage Trust 2014-HD is a floating-rate loan secured by two Morgans Hotel Group, hotel properties.

The properties are Hudson, an 866-key boutique hotel located at 356 West 58th Street in New York City and Delano, a 194-key boutique hotel located at 1685 Collins Avenue in Miami Beach, Fla.

The loan has an original term of two years and allows for three one-year extensions, subject to certain conditions. A LIBOR cap of 1.75% is in place for the trust loan through February 15, 2016.

The transaction is also backed by a $42.5 million B-note that pays interest only at a rate of one-month LIBOR plus a spread of 6.00%.

Also underlying the securitization is  $150.0 million of mezzanine financing, which is secured by the mezzanine borrower’s direct equity interests in the borrowers of the trust loan.  

Morningstar noted in the presale report that lodging properties are exposed to more cash-flow volatility than other types of commercial real estate because of changes to their daily rate. However this risk is mitigated by “the experienced ownership/management, quality of the collateral property, recent renovations to the properties, and the strength and resiliency of the market in which it reside.”

The ratings agency expects to assign an 'AAA' rating to the $95.45 million class A notes; an 'AA' rating to the $39.21 million class B notes; an 'A' rating to the $29.14 million class C notes; and a 'BBB' rating to the $38.5 million class D notes; and a 'BB-' rating to the $55.2 million class E notes.

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