The latest single-asset commercial mortgage deal to hit the market is backed by eight water park resorts.
Great Wolf Resorts 2015-WOLF securitizes a $715 million loan used to finance Centerbridge Partners’ purchase of Great Wolf Resorts from Apollo Global Management, according to a presale report published by Kroll Bond Rating Agency.
The loan is secured by the fee simple interest in eight wholly owned properties in as many states with a total of 3,181 “keys.” The collateral also includes the minority equity interest in two joint ventures entities that each own a resort property as well as a pledge of a license agreement for a property owned and managed by a third party.
This loan, which was originated on May 15 by J.P. Morgan Chase and Citigroup Global Markets Realty, pays a floating rate of interest and is structured with an initial term of three years and four one-year extension options; it pays only interest for its entire term.
In addition to this loan, the properties also secure $360 million subordinated indebtedness that will be securitized by its lenders in a separate transaction.
The securitization trust will issue eight classes of certificates, six of which are entitled to principal and interest and two of which receive interest only. Kroll has assigned a preliminary AAA’ rating to three senior tranches, despite flagging a number of risks in its presale report.
Among these risks is that fact that the in-trust loan-to-value ratio, as calculated by Kroll, is 87.2%, which Kroll considers to be “relatively high” for a single borrower CMBS where the underlying collateral is comprised of lodging assets, which tend to exhibit more cash flow volatility than other property types.
Moreover, the deal’s all-in LTV, as calculated by Kroll is higher, at 131.1%, taking into account the existing mezzanine debt held outside the trust.
Another concern is the fact that revenue per available room on these properties dipped in 2014 after rising steady between 2010 and 2013, although it picked up again in the first quarter of 2015.
And according to the appraiser, there is new supply in the form of transient hotels or indoor waterpark resorts coming online in five of the markets in which the properties are located.
This isn’t the first time a loan to Centerbridge has been securitized; it was the lead investor in the $3.9 billion Extended Stay America acquisition in 2010, which was securitized in the Extended Stay America Trust 2010-ESH and subsequently refinanced with debt issued in conjunction with the Extended Stay America Trust 2013-ESH, according to Kroll. More recently, Centerbridge was the sponsor of an $850 million financing of manufactured housing communities, extended-stay recreational vehicles, and vacation/leisure RV resorts that included a $650 million loan securitized in Carefree Portfolio Trust 2014-CARE.