Citigroup is back with another offering of bonds backed by a portfolio of hotels jointly owned by Starwood Capital Group Global I (95%) and Schulte Hospitality Group (5%).

Fitch Ratings and Morningstar have both assigned preliminary ratings to Citigroup Commercial Mortgage Trust 2015-SHP2 (CGCMT 2015-SHP2), which is backed by a $215 million first lien mortgage loan secured by a portfolio of 22 hotels, totaling 2,673 keys, located in 10 states.

The loan is floating rate and pays only interest for its entire term. It has an initial term of only two years, but can be extended for one year up to three times, for a total possible term of five years.

The securitization trust will issue $89.5 million class A notes that benefit from 58.4% credit enhancement and are rated ‘AAA’ by both Fitch and Morningstar. At the subordinate level, there are $18.5 million of class B notes rated ‘AA-,’ $13 million of class C notes rated ‘A-,’ $21 million of class D notes rated ‘BBB-‘/’BBB,’ $38 million class E notes rated ‘BB,’ and $35 million class F notes rated ‘B-.‘

The class B, C, D, and E notes benefit from 58.4%, 49.8%, 43.7%, 34%, and 16.3% credit enhancement.

All of the notes have an expected final maturity of July 2027.

Fitch and Morningstar put the loan-to-value ratio for the deal at 104.3% and 101.6%, respectively. The high leverage of CGCMT 2015-SHP2 serves as a key risk of the transaction.

Both rating agencies cite the diverse portfolio of the deal as a key strength of the transaction, with properties most highly concentrated in Texas (33.9%), Ohio (19.7%), and Florida (11.8%).  Additionally, the deal has strong franchise brand affiliation, with properties represented by Hilton Garden Inn (21.7%), Embassy Suites (14.5%), and Home2 Suites (11.8%).

Furthermore, the properties have received renovations totaling $16,688 per key in capital improvements since 2008. There is also a $30.9 million reserve for renovations primarily to guest rooms and common areas over the next 24 months.   

The deal is expected to close on August 6.

It comes to market four months after the $210 million Citigroup Commercial Mortgage Trust 2015-SSHP, which was also backed by a single loan on a portfolio of hotels jontly owned by Starwood and Schulte. That deal was also considered to be highly leveraged, and received similar ratings for the class A through F notes. 

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