Deutsche Bank's latest CMBS securitization trust will offer investors securities that are backed by a loan secured by a single loan. The CMBS will also include notes that are backed by a pool of three loans, secured by 17 properties.
The deal, COMM 2014-FL4, will be backed by four large, floating rate loans that are all secured by hospitality properties. German American Capital Corporation is the loan seller.
The unusual structure is comprised of two separate pools of loans. One group is comprised of three pooled loans and the other is comprised of a single loan, according to Kroll Bond Ratings (KBRA) and Morningstar presale reports. Together the loans have a principal balance of $441.0 million.
The pooled loans consist of the Blackstone Select Service Portfolio ($126.0 million), Sofitel Chicago Water Tower ($80.0 million), and the Hilton Portland & Executive Tower ($80.0 million). The loans have two-year terms with three, one-year extension options. None of the loans are cross-collateralized.
These interest-only loans support the classes A, B, C and D notes that have been assigned preliminary ratings by KBRA only. The AAA’ rated class A notes are due July 2031; the AA-’ class B notes are due July 2031 and the A-’ rated class C notes are also due July 2031. The class D notes, also due July 2031, will not be rated. In addition to those notes, the capital structure will also offer “rakes” off of each of the pooled loans. These notes are essentially securitized B notes.
The non-pooled loan is comprised of the Renaissance Aruba Resort & Casino, which has $90.0 million senior participation million and $65.0 million junior participation. The Aruba loan is standalone and not entitled to cashflow distributions from the pooled loans, according to KBRA.
Renaissance Aruba Resort & Casino has a three-year term with two, one-year extension options. KBRA noted in the presale report that that there is some risk associated with the fact that the Renaissance Aruba Resort & Casino is a non-US asset and the loan documents are structured in accordance with Aruban law, which could lead to delays, in connection with enforcing judgments or pursuing foreclosure. Additionally, loans in foreign nations may subject the trust to foreign currency and country risk.
“The borrower is required to maintain political risk insurance throughout the loan term, insuring against expropriatory acts, political violence, war (including civil war), currency inconvertibility, and non-transference of currency outside of the host country,” according to the presale report.
The loan secures the class AR1, AR2, AR3, AR4 and AR5 notes that have been assigned preliminary ratings by both KBRA and Morningstar. The class AR1 notes, rated AAA’/ AAA’, class AR2 notes, rated AA-’/ AA-’; and the class AR3 notes, rated A-’/ A-’ are all due May 2031. The class AR$ and AR% will not be rated.
All of the loans are secured by hospitality properties. These properties are exposed to more volatile cash flows than other property types because the cash flows depend on nightly room rates. However, KBRA said that the high quality assets that secure all of the loans in the deal mitigate this risk.
The Sofitel Chicago Water Tower and the Hilton Portland & Executive Tower are secured by full-service hotels located in downtown areas of each hotel’s respective city. The Blackstone Select Service Portfolio is comprised of 15 select and limited-service hotels located primarily in the Northeast, within seven states across the US.
The non-pooled asset, Renaissance Aruba Resort & Casino, is secured by a resort in Aruba that includes two casinos, two retail centers, and a private island.
