The PGA Trust 2024-RSR2 is preparing to issue $315 million in mortgage pass-through certificates funded by interests in a floating-rate mortgage secured, ultimately, by a newly renovated, full-service resort hotel and private club in Palm Beach Gardens, Fla., a golfing haven.
It is all within the surroundings of six golf courses totaling 99 holes that have staged almost 40 pro events, including a Ryder Cup, a PGA Championship, and 19 Senior PGA Championships, according to Fitch Ratings, which assessed the notes. The rating agency said it gave the PGA National Resort a B+ property quality grade, and it increased its loan-to-value hurdles by 8.75% to reflect the collateral quality.
Morgan Stanley is the depositor, while it and Wells Fargo Bank originated the loan, Fitch said. Midland Loan Services is on the deal as master servicer and Situs Holdings has signed on as special servicer, Fitch said.
The deal will issue class A through HRR notes through 10 tranches, Fitch said. Of the notes rated by Fitch, the A, B, C and D tranches have legal final maturity dates that range from June 2039. The X-CP and X-EXT class notes have maturity dates of June 2025 and June 2039, respectively, the rating agency said.
PGA National Resort is a 360-key property, and the loan on it has yet to be closed, according to Fitch Ratings. After the loan is closed, repayment proceeds will refinance about $250 million of existing debt, pay closing costs and allow $55.6 million of cash equity to sponsor Brookfield Real Estate Partners III, an affiliate of Brookfield Asset Management, according to Fitch.
Aside from the professional golfing draws, the Palm Beach Gardens property includes 60,000 square feet of event space, a 35,000-square-foot fitness center, and eight food and beverage establishments.
Although Fitch counts Brookfield Asset Management's experience and the property's location as positive highlights, but also cautions investors about several other elements. The $55.6 million borrower cashout was one. Also, because the loan is interest only, the lack of amortization before maturity raises refinance risks, the rating agency said. Also, because the loan funds one property, the lack of any diversification leaves it more susceptible to single-event risk related to the market.
Fitch assigns ratings of AAA to the A notes; AA- to the class B notes; A- to the class C notes; and BBB- to the classes D and X notes.
