Starwood Capital Group is tapping the mortgage bond market to refinance a portfolio of 138 hotels.

The investment firm recently obtained an $800 million mortgage from Goldman Sachs that was used to refinance $753.1 million of debt on 138 Marriott and Hilton-branded hotels acquired between 2007 and 2015; some of this debt was previously securitized in several transactions, the bulk of it in BBCMS 2015-SLP. The remaining $46.9 million of proceeds were used to finance a $34.2 million reserve, return $1.6 million of cash equity to the sponsor, and pay closing costs.

The mortgage, which pays only interest, and no principal, for its five-year term, is split into a $332.7 million senior A note and a $467.3 million B note. The A note is further split into a $257.7 million controlling note and two pari passu, non-controlling companion loans totaling $75 million. Together, the controlling piece of the A note and the B note will serve as collateral for a new securitization called GS Mortgage Securities Corp. Trust 2017-SLP.

DBRS expects to assign an AAA to the senior tranche of notes to be issued, which benefit from 69.022% subordination.

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The two non-controlling senior notes will be held outside the trust to be contributed to future securitizations.

In aggregate, the portfolio totals 10,576 rooms, or “keys,” located in 27 different states. Only 11 hotels representing 12% of the allocated loan balance have franchise expiries during the loan term. Most are managed by Aimbridge Hospitality (84.9% of the total loan amount); the remainder is managed by either Hersha Hospitality Management or Schulte Hospitality Group,

The biggest risk to the transaction, according to DBRS, is the fact that the portfolio is concentrated in a single type of property, and one with volatile cash flows.

Also, the new financing results in a loan-to-value ratio, as calculated, by DBRS of 116.9%. The rating characterizes this as “high,” though it acknowledges that it is based on a “stressed” valuation assuming a significant increase in market cap rates. Based on the appraiser’s current market valuation, which assumes a bulk sale, the LTV is 68.7%, which would imply that the owner still has $365 million of equity in the properties.

DBRS takes comfort in the geographic diversity of the properties; Texas has the highest concentration by allocated loan balance (17.2%) and it also has the highest concentration by number, with 32 hotels located in the state.

DBRS also noted that the sponsor has made sizable capital investment across the portfolio, portfolio, with $80.7 million ($7,634 per key) spent through the second quarter of this year.

The collateral portfolio reports an average occupancy of 72.7% for the 12 months ending in June.

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