JPMorgan Chase Bank is marketing $185 million of commercial mortgage backed securities backed by a portfolio of hotels, according to presale reports from Standard & Poor’s and Kroll Bond Rating Agency.
All six tranches of the deal, called JPMCC 2015-MAR7, were assigned the same ratings by S&P and Kroll, with the $55.4 million of senior class A notes rated triple-A; the $20.9 million of class B notes rated double-A minus and $27.6 million of C notes rated single-A minus.
JPMorgan Chase Bank is underwriting the deal; Midland Loan Servicer is acting as the servicer and Wells Fargo Bank is serving as a trustee.
The transaction is backed by a single, first-lien mortgage loan that is secured by seven full-service Marriott lodging properties in five states. The deal offers the highest exposure to Ohio (47.6%), Texas (14.4%), and Kentucky (12.7%). The properties have an aggregate total of 2,080 rooms.
The fixed-rate loan is due in 2022 and pays only interest for the first five years, and monthly principal payments based on a fixed amortization schedule for the last two years. The interest rate is fixed at 5.07% for the life of the loan.
The hotels also serve as collateral for a $25 million mezzanine loan, not included in the CMBS collateral pools. This mezzanine loan is also secured by the stock of the borrower.
The first-lien loan has a loan-to-value (LTV) ratio of 88.5%, as calculated by S&P, and 90.4%, according to Kroll. However, Kroll notes that when the$25 million mezzanine loan is taken into consideration, the borrower’s LTV is even higher.
An additional risk is that six of the seven properties (85.6% of the collateral) securing the deal are exposed to secondary markets, which are historically more prone to defaults and losses than primary markets. S&P also said that the high geographic concentration of the properties in and around Ohio serves as a risk, even though no single one contributes more than 20% of S&P’s calculated net cash flow portfolio.
Both rating agencies cite the hotels’ affiliation with Marriott International as well as planned renovations - $65.1 million (or $31, 272 per room) - as key strengths of the transaction. Planned renovations include upgrades to common areas, meeting spaces, guest rooms, bathrooms and back-of-the-house facilities.
The deal is expected to close July 24, 2015.