Bahamas Atlantis Hotel


The Deutsche Bank, Morgan Stanley and Citigroup led BHMS 2014-ATLS Mortgage Trust priced $1.0 billion of securities backed by a single loan secured by the Atlantis Resort hotel in Paradise Island, Bahamas, according to a person familiar with the deal.

The loan is divided into a $350 million floating-rate component and a $650 million fixed-rate component.

The floating-rate components have a three-year initial term and fully extended maturity at seven years.  The notes have been assigned ratings by DBRS, Kroll Bond Ratings and Standard & Poor’s. The class A notes, rated ‘AAA’/ ‘AAA’ priced at 150 basis points over Libor.

By comparison, in July Bank of America Merrill Lynch priced the two-year, floating rate notes, triple-A rated notes issued from BAMLL Commercial Mortgage Securities Trust 2014-ICTS, priced its triple-A rated, two-year class A notes at 80 basis points over one month Libor .  The deal is backed by the mortgage on the Intercontinental New York Times Square, a 36-story, 607-room full-service luxury hotel in New York City.

The class B notes, rated ‘AA’/ ‘AA-’ priced at 195 basis points over Libor, the class C notes, rated ‘A’/ ‘A-’ priced at 245 basis points over Libor, the class D notes, rated ‘BBB’/ ‘BBB-’/ ‘BB+’ priced at 300 basis points over Libor and the class E notes, rated ‘BB’/ ‘BB-’/ ‘BB-’ priced at 400 basis points over Libor.

The fixed-rate components have a seven-year term.  The ‘AAA’/ ‘AAA’ rated class A notes priced at swaps plus 150 basis points. The class B notes rated ‘AA’/ ‘AA-’ priced at 215 basis points and the ‘A’/ ‘A-’, class C notes priced at swaps plus 270 basis points.

At the triple-B level, the class D notes priced at swaps plus 325 basis points and the ‘BB’/ ‘BB-‘/ ‘BB-’ rated class E notes priced at swaps plus 400 basis points.

The trust also placed $200 million of unrated class M, fixed-rate notes with an average weighted life of 6.87-year priced at swaps plus 545 basis points.

Among the deal’s strengths, according to S&P, is the fact that the property will be operated under a franchise agreement with Marriott International that was executed in June 2014 with a 20-year term.

Also, the borrower is responsible for expenses that would typically result in shortfalls to the those investing in the deal, such as special servicing, work-out, and liquidation fees, as well as costs and expenses incurred from the special servicer's appraisals and inspections.

Among the risks to the deal, S&P cited the fact that loan is interest-only for its entire seven-year extended term, which the rating agency views as a riskier than amortizing loans, because of the higher loan balance to be refinanced at maturity.

Also, the trust loan balance has a loan-to-value ratio of 89.9%, based on S&P's valuation, which is higher than most single-borrower transactions that is has rated recently.

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