The first commercial mortgage securitization of the year is being used to refinance five hotels owned by Ashford Hospitality Prime, a publicly traded real estate investment trust, and managed by Marriott International.

The $365 million loan was originated by Morgan Stanley.  It pays only interest, and no principal, for an initial term of two years and can be extended by 12 months up to five times, for a total possible term of seven years.  

Loan proceeds refinanced three loans totaling $335.5 million that were securitized in three separate conduit CMBS transactions, WBCMT 2007-C31, WBCMT 2007-C32 and WBCMT 2007-C33, right before the financial crisis. At the time, the properties were appraised at $528.6 million and combined net cash flow for full year 2007 was $38.3 million.

By 2009, at the depths of the recession, net cash flow had fallen to $26.0 million, but it has since recovered to $51.4 million for full year 2016, according to DBRS.

The refinancing provided a “minimal” cash out to the sponsor of $16.7 million, the presale report states.

This new loan is being securitized in Morgan Stanley Capital I Trust 2017-PRME, which will issue seven classes of notes with preliminary ratings (as of Jan. 23) from Standard & Poor’s and DBRS. Both rating agencies expect to assign a triple-A to the senior $154.09 million tranche.

The most subordinate, $18.25 million tranche is unrated; it will be held by an affiliate of Blackstone Real Estate Debt Strategies in order to comply with the Risk Retention Rule.

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