Credit Suisse plans to issue $350 million in securities backed by a single commercial mortgage loan that is secured by the Four Seasons Resort Maui at Wailea-Makena, Hawaii, according to Morningstar.
The loan has an initial term of 24 months but can be extended by a maximum of five-years either through five one-year extensions, one three-year and two one-year extensions, or one two-year and three one-year extensions. It will pay only interest for its entire term. Also included in the trust is additional mezzanine debt that totals $175 million.
The deal follows a $525 million refinancing for the hotel provided by Credit Suisse to MSD Capital, the loan sponsor, earlier this year. MSD Capital, a New York based investment firm that manages the capital of Michael Dell and his family has $13 billion of assets under management. In addition to the Four Seasons Resort Maui at Wailea, the sponsor also owns the Four Seasons Hualalai at Historic Ka’upulehu in Hawaii, and the Fairmont Miramar Hotels and Bungalows in Santa Monica, California.
The Four Seasons Resort Maui at Wailea is the only 5-Diamond and 5-Star luxury resort located on the island of Maui and the most expensive hotel in Maui. The property is located on beachfront property on Wailea Beach, overlooking the Pacific Ocean.
Generally CMBS secured by hotel properties tend to be exposed to volatile cashflows because of the absence of long-term tenant leases, a feature common to other types of commercial real estate. However this hotel tends to outperform competing island hotels and has out penetrated its competitive set in terms of occupancy every year since 2010, according to Smith Travel Research. The two largest suites in the property were completely renovated earlier in 2014 and have successfully maintained an average room rate of $16,500 per occupied room night since renovations were completed, as reported by property management.
Location also means that the hotel isn’t likely to see any new competitors. Maui’s volcanic origins make most of the island unsuitable for development; there have been no new hotel developments on the island in over 22 years. “Areas where development has been feasible have been mostly built out and it is reported that due to the high cost of construction on the island as well as an arduous zoning process, no new hotel properties are expected to be added to the inventory in the near future,” the Morningstar presale states.