The latest single-asset CMBS to come to market is backed by one of Hilton Hotels Corp.'s newest properties, according to rating agency reports.
The $345 million deal, HILT 2014-ORL Mortgage Trust is secured by a first-mortgage lien encumbering the free interest in one full-service hotel, the Hilton Orlando. The property is an approximately 182,000 square foot, upscale, full-service hybrid resort/convention complex with 1,417 guest rooms and 50,000-sq-ft of outdoor space.
Proceeds of the loan were used to pay off existing debt, fund a capital improvements and return equity to the sponsor.
The loan has an initial two-year term, maturing in July 2016, with five, one-year extension options, and has a floating interest rate of Libor plus 201 basis points.
Of the nine tranches of notes to be issued by the securitization trust, four received triple-A preliminary ratings from Standard & Poor's and Fitch Ratings, including the $116.5 million class A notes and three classes with notional amounts.
The mortgage loan sellers for the deal are UBS Real Estate Securities and Wells Fargo Bank; UBS Securities and Wells Fargo Securities are bookrunners for the transaction.
Among the deal’s strengths is the fact that, since the property’s opening in 2009, performance has improved each year, with revenue per available room increasing to $118.2 in the trailing 12-month period that ended in May, according to the presale report.
According to VisitOrlando, the number of visitors to the Orlando reached a new peak of 58 million in 2013, up 2.1% from 2012, making it one of the most visited cities in the world. Visits are correlated closely with attendance at the major theme parks; Walt Disney World, Universal Orlando Resort, and SeaWorld Orlando. Growth in theme park attendance is driven in part by significant expansions at the parks, including the recent opening of Universal’s Wizarding World of Harry Potter and Magic Kingdom’s New Fantasyland.
Among risks to the deal, the trust loan balance is highly leveraged with an 88.8% LTV ratio, based on S&P's valuation, which is higher than most single-borrower transactions that the rating agency has rated recently.
Last year Hilton completed what is still the largest CMBS since the financial crisis, a $3.5 billion deal backed by mortgages on 23 full-service and limited-service hotels. The deal was part of a broader debt refinancing in preparation for the hotel operator's initial public offering.