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Credit Suisse bulks up on hotels in $952M conduit CMBS

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Credit Suisse’s latest offering of commercial mortgage bonds checks in with unusually high exposure to hotels, according to presale reports.

The $952.9 million CSAIL 2018-CX11 Commercial Mortgage Trust is backing a total of 56 whole or partial loan participations secured by 118 commercial properties, with an average loan size of $17 million. Just over 20% of the balance are loans on hotels, which are considered to be one of the riskier types of commercial property because of the volatility of room revenue. By comparison, the average exposure to hotels in conduits rated by Fitch Ratings was 15.8% in 2018 and 16% in 2016.

Among the hotel-property mortgages in the pool is the Hilton Clearwater (Fla.) Beach Resort & Spa, which is also the second-largest portfolio loan at $59.9 million. The note held in the trust is a portion of a larger, $132.9 million loan used by the owner, CSC Holdings, to refinance and cash out equity in the property.

The loans in the collateral pool were contributed by Natixis Real Estate Capital, Column Financial, Barclays Bank, BSPRT Finance and Argentic Real Estate Finance.

CSAIL 2018-CX11 will issue six tranches of Class A super senior notes with 30% credit enhancement and triple-A ratings from DBRS, Moody’s Investors Service and Fitch. The Class A notes total $745.6 million.

A seventh Class A tranche (A-S) with 21.75% credit enhancement support received a preliminary triple-A from Fitch and DBRS, but a Moody’s Aa2 rating two notches below that agency’s top Aaa rating.

Argentic will hold hold four classes of triple-B and double-B rated subordinate notes in a horizontal risk-retention position.

Credit Suisse, Natixis and Barclays are the underwriters.

Two of the top 10 loans are hotel-related. Another prominent loan included in the pool is a $34 million participation in a November $57 million acquisition loan for Westplace Modesto Investors' purchase of two Melbourne, Fla., oceanfront resorts.

Three of the top four loans are noncontrolling shares of whole-loan mortgages, including the largest: a $63.5 million portion of a $187 million loan originated last year for an equity cash-out refinancing for a portfolio of properties owned by the international real estate investment trust Global Net Lease (GNL).

Other top pari passu, noncontrolling loans in the pool include a $49.8 million share of a $360 million refinancing loan issued last year secured by New York’s One State Street Plaza; a $46.7 million partial-interest-only portion of a $229.3 million portfolio of California properties underwritten by Barclays; and a $20 million slice of a $550 million refinancing mortgage secured by the private-debt sponsors of the high-rise Yorkshire & Lexington Towers in New York.

The GNL and high-rise tower loans were also included in last November’s CSAIL 2017-CS10 trust pool.

One of the key changes from the CSAIL 2017-CX10 pool is the reduced exposure to riskier, single-tenant loans. Last November, Credit Suisse included six single-tenant loans making up 27.2% of the $855.3 million CSAIL 2017-CX10 trust pool. The new deal raises the number of riskier single-tenant loans to nine, but they are smaller loans that make up only 12.7% of the aggregate pool loan balance.

Twenty of the loans (44% of the pool) pay only interest and no principal for their entire terms.

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CMBS Credit Suisse Moody's Fitch DBRS Morningstar Natixis