Park Hotels & Resorts, the real estate investment trust being spun out of Hilton Worldwide Holdings, is tapping the securitization market for a cash-out refinancing of two full-service hotels in San Francisco.

Under a plan announced in February, Hilton will spin off PHR, which will hold a portfolio of owned and leased hotels and resorts, and Hilton Grand Vacations, which will own and operate Hilton’s timeshare business. Hilton will retain its core management and franchise business. After the spin-off, PHR is expected to become one of the largest publicly traded real estate investment trusts in the U.S. lodging industry.

The spin-offs, which have not occurred, are contingent upon rulings from the Internal Revenue Service and Hilton’s counsel regarding the tax-free nature of the spin-offs and, according to the transaction term sheet, there are no assurances that the spin-offs will occur.

As part of the spin-off, Hilton is planning to amend its management agreements for the two properties, according to Morningstar Credit Ratings. The amended management agreements will have a term of 70 years including extensions and will expire on Dec. 31, 2077, with a base management fee of 3.0% of gross revenue. In addition, there will be an incentive fee equal to 6.0% of adjusted gross profit, a furniture, fixtures and equipment reserve equal to 4.0% of gross revenue, and no performance-based termination rights.

Although the spinoff has yet to be completed, PHR has obtained a $725 million first mortgage on the two properties, the Hilton San Francisco Union Square and the Hilton Parc 55 San Francisco, from five banks, JPMorgan Chase Bank, Deutsche Bank, Goldman Sachs, Barclays Bank, and Morgan Stanley Bank. This loan, which pays fixed rate of interest of 4.1145%, and no principal, over its 84-month term, was used to repay existing debt and return $300.7 million of cash to the borrower.

That’s 41.5% of the loan amount.

Now the loan is being used as collateral for an offering of commercial mortgage bonds dubbed, Hilton USA Trust 2016-SFP, to be rated by Morningstar and Moody’s Investors Service. Both have assigned triple-A ratings to the senior tranche of securities to be issue by the trust.

Wells Fargo Bank is the master servicer and Talmage is the special servicer.

Morningstar thinks the mortgage bonds to be issued will have a low risk of default, in part because the properties are only moderately leveraged, with a loan to value ratio of 72.4% and a high debt service coverage ratio of 2.58x. Also, “the portfolio has experienced steadily improving cash flow performance, buoyed by robust San Francisco market fundamentals, the expansion of the Moscone Center, and the hotels’ location in the center of Union Square,” the rating agency’s resale report states.

Morningstar also noted that the hotels have complementary strengths: Hilton Union Square, within walking distance of the Moscone Center, has 130,000 square feet of meeting space and derives 40% of its demand from the meetings and group segment as of the 12 months ended in August 2016; Parc 55, with renowned food and beverage outlets including the Michelin-starred Kin Khao restaurant, derives 60% of its demand from the leisure or transient segment.

However, Morningstar is concerned about the age and possible functional obsolescence of the properties, the unionized workforce, and the combined revenue per available room penetration of less than 90% as of August.

Moody’s also looks favorably at the location of the hotels. In its presale report, it notes that San Francisco is “one of the strongest hotel markets in the United States, given the confluence of corporate, leisure and group demand, and has only shown minimal recent signs of contracting.” Moreover, Moody’s appears to look more favorably on the quality of the hotel properties than Morningstar, saying they “have received significant capital expenditures and are expected to undergo additional planned updates in the near future.”

Moody’s view of the leverage on the properties also diverges from Morningstar. It calculates the LTV at 106.5%.

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