Recent major property refinancings and acquisitions have pushed the issuance of single-asset, single-borrower commercial mortgage bond offerings past last year's total over the same time.
Moreover, the issuance of such deals is on track to outpace issuance of multi-property, multi-borrower deals, according to Robb Paltz, associate managing director at Moody's Investors Service, and David Fine, a vice president-senior analyst at Moody's. That would be a reverse of last year.
The most recent examples include Goldman Sachs, Morgan Stanley and JP Morgan providing $1.18 billion in financing to Fontainebleau Development, owner of the 1,594-room oceanfront resort in Miami Beach.
And, Morgan Stanley provided a $615 million five-year, fixed-rate interest-only mortgage loan to Brookfield Property REIT on the recapitalization of the Park Meadows Mall in Lone Tree, Colorado. That deal was part of Brookfield Property's acquisition of joint venture interests in four malls.
Both lenders are rolling the loans into new single-asset single-borrower commercial mortgage-backed securities. Paltz was an analyst for Moody's presale report on the Park Meadows offering; and Fine an analyst on the Fontainebleau offering.
Those deals bring year-to-date volume to $37.41 billion, according to a CoStar analysis. That is up from $35.68 billion through the same time last year, a roughly 5% increase. Moody's is also tracking additional deals that should drive SASB deals to record high totals.
The SASB deals demonstrate debt investors' continued interest in acquiring loans and securities backed by loans. SASB deals are typically backed by the strongest performing properties in the largest markets, supported by strong owners and sponsors. The loan repayment periods are typically shorter, running two to five years.
Typical of the trend this year were deals backed by major property buyers Blackstone and Brookfield. Blackstone deals have accounted for $9.43 billion of the total with more transactions still in the works. Brookfield's total has surpassed $4 billion and also has more on the way.
Luxury hotel financings have helped drive SASB volume in the past two months. The Fontainebleau offering still to price is the largest hotel-backed deal this year. A $975 million portion of the refinancing backs the offering.
The Fontainebleau has gained an iconic status from attracting such celebrities and entertainers as the late Elvis Presley, Bob Hope, Lucille Ball and Judy Garland. The hotel has also been featured in several major Hollywood productions including "Goldfinger," "The Bellboy," "Scarface," "The Specialist" and "The Bodyguard."
In the latest refinancing, the hotel was appraised at $1.665 billion, according to Fine's presale analysis.
The borrower is indirectly majority-owned by Jeffrey Soffer, who formerly led Turnberry Associates with his sister, Jackie Soffer. He is now focusing his efforts on large-scale lifestyle developments within the hospitality, retail, residential and commercial sectors with his new company, Fontainebleau Development.
The mortgage lending provides for a five-year term and monthly interest-only payments at a fixed rate of 3.97%. The total refinancing was used to pay off existing debt and returned $112 million to Fontainebleau Development.
The hotel bond deals also speak to the continued healthy financing environment in the United States and abroad for high-caliber properties, said Jan Freitag, a senior vice president for STR.
"There's no secret that the U.S. hotel industry will start to see a slower-growth period, and this is the time for owners to invest, upgrade and expand to make their properties attractive," Freitag said.
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