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Starwood Capital plans to refinance extended-stay hotel debt via CMBS

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Private investment firm Starwood Capital Group Global is tapping the commercial mortgage-backed securities market to refinance debt on a portfolio of 58 extended-stay hotels, as well as the construction costs of several recently built hotel properties.

According to ratings agency presale reports, Starwood of Greenwich, Conn., is securitizing a $265 million, two-year loan (with three one-year extension options) from Goldman Sachs that refinances $190.2 million in existing debt as well as $43.1 million in construction debt.

The loan also plus provides a $16.5 million cash-out payment to Starwood Capital.

The single-borrower transaction will be backed by Starwood’s fee-simple interest in the hotel properties operating in 12 states under either the InTown Suites banner or Starwood’s newer UpTown Suites brand. Fifty of the hotels are InTown Suites properties with an average age of 16 years, and built as early as 1992. The UpTown Suites hotels were built between 2017 and 2019.

While hotel cash flows have been volatile during the coronavirus pandemic, extended stay hotels have fared much better. Moody’s Investors Service says the InTown/UpTown Suites portfolio (encompassing 7,140 guest rooms) has generated “stable” daily revenue per-average-room (RevPAR) since 2017, including $32.41 this year (as of August).

In contrast to many hotel operators, the portfolio’s monthly revenue has increased each month since April — from $5.29 million to $6.28 million in August.

An InTown/Uptown suites property “operates as somewhat of a hybrid between long term lodging and residential as the average length of stay is approximately 75 days,” according to Moody’s, and are more “akin” to multifamily housing with kitchenettes and other extended-stay furnishings. It is a low-cost option for guests, with an average daily rate under $50.

The GS Mortgage Securities Corp. Trust 2020-TWN3 transaction features seven classes of notes. Both Moody’s and Kroll Bond Rating agency assigned early triple-A ratings to a $105.9 million Class A senior-note tranche.

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CMBS MBS Hospitality and lodging