Deutsche Bank and Goldman Sachs are marketing a $865 million of commercial mortgage bonds backed exclusively by hotels.

The trust, Commercial Mortgage Pass-Through Certificates Series 2014-INNS, will issue eight classes of notes, including a $271 million tranche with a preliminary ‘AAA’ rating from Standard & Poor’s.

The notes are backed by a single, two-year, floating-rate commercial mortgage loan totaling $865.0 million, with three one-year extension options that is secured by the fee and leasehold interests in 104 limited-service and extended-stay hotels and two full-service hotels.

While the collateral is concentrated by sponsor and property type, S&P said in its presale report that this concentration is somewhat offset by geographic diversity as the properties are located throughout 34 states. “Furthermore, the portfolio is granular as no property contributes more than 4.8% by 2013 NCF or 5.2% by allocated loan amount,” the report states.

The hotels in the portfolio are managed by eight different management companies; Hilton manages 37, , representing 30.8% by allocated loan amount. The second largest manager is Pillar Hotels & Resorts, which manages 21 hotels (19.6%), followed by McKibbon Hotels, which manages 19 of the hotels (14.4%).

Among other risk factors is high leveraged: the pool of collateral has a loan-to-value ratio of 95.4%, based on S&P’s valuation of the properties, which is higher than the LTV ratio for most single-borrower transactions that the rating agency has rated recently. Also, the mortgage pay interest only for its entire five-year extended term, meaning there will be no scheduled amortization during the loan term.

All of the hotels are owned by investment funds managed by Goldman Sachs. These funds have agreed to sell the properties to a subsidiary of ARC Hospitality, a real estate investment trust, in the four quarter of 2014 for $1.925 billion. ARC will continue to service the loans following the sale.

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