KBRA Assigns Preliminary Ratings to ARZ 2024-BILT
May 13 2024 - 11:11AM
Business Wire
KBRA announces the assignment of preliminary ratings to nine
classes of ARZ 2024-BILT, a CMBS single-borrower
securitization.
The collateral for the transaction is a $460.0 million
non-recourse, first lien mortgage loan that was co-originated by
Morgan Stanley Bank, N.A., Deutsche Bank AG, New York Branch, and
JPMorgan Chase Bank, National Association.. The fixed rate loan has
a five-year term and requires monthly interest-only payments that
will be based on a 7.32% coupon. The mortgage loan will be secured
by the borrower’s fee simple interest in the Arizona Biltmore
located in Phoenix, Arizona, the borrower’s leasehold interest in a
portion of the common areas at the Arizona Biltmore Hotel Villas
Condominium, the rental management income payable to the borrower,
and all intellectual property directly related to the trademark
“Arizona Biltmore” held by the borrower. The subject property
features 593 collateral keys as well as 112 keys that are contained
within 56 vacation villas that participate in a hotel-managed
rental program. The hotel was originally constructed in 1929 under
the influence of Frank Lloyd Wright and his protégé Albert Chase
McArthur. Facilities and amenities include seven food &
beverage outlets, approximately 184,000 sf of meeting space, seven
pools, a variety of water slides, a 28,000 sf full-service spa, a
fitness facility, tennis and pickleball courts, and five retail
shops. Since 2018/2019, the property has received a comprehensive
$165.3 million renovation ($278,711 per collateral key), which
included $125.0 million ($210,793 per collateral key) to upgrade
the guestrooms, renovate and reconcept the food & beverage
outlets, refresh the meeting spaces, and improve the pool and
aquatic offerings. For the TTM 3/2024 period, the property achieved
an occupancy of 68.7% with an ADR of $385.28, resulting in a
revenue per available room (RevPAR) of $264.74. As of year-end
2023, the subject property achieved occupancy, ADR and RevPAR
penetration rates of 111.6%, 107.5% and 120.0%, respectively.
KBRA’s analysis of the transaction included a detailed
evaluation of the property’s cash flows using our U.S. CMBS
Property Evaluation Methodology, and the application of our U.S.
CMBS Single Borrower & Large Loan Rating Methodology. In
addition, KBRA also relied on its Global Structured Finance
Counterparty Methodology for assessing counterparty risk in this
transaction, its Methodology for Rating Interest-Only Certificates
in CMBS Transactions, and its ESG Global Rating Methodology, to the
extent deemed applicable.
The results of our analysis yielded a KBRA net cash flow (KNCF)
for the subject of approximately $42.5 million, which is 12.7%
below the issuer’s NCF, and a KBRA value of approximately $447.0
million, which is 36.7% below the appraiser’s as-is value. The
resulting in-trust KBRA Loan to Value (KLTV) is 102.9%. In our
analysis of the transaction, we also reviewed and considered third
party engineering, environmental, and appraisal reports, the
results of our site inspection of the property, and legal
documentation review.
To access rating and relevant documents, click here.
Click here to view the report.
Methodologies
- CMBS: U.S. CMBS Property Evaluation Methodology
- CMBS: U.S. CMBS Single Borrower & Large Loan Rating
Methodology
- Structured Finance: Global Structured Finance Counterparty
Methodology
- CMBS: Methodology for Rating Interest-Only Certificates in CMBS
Transactions
- ESG Global Rating Methodology
Disclosures
Further information on key credit considerations, sensitivity
analyses that consider what factors can affect these credit ratings
and how they could lead to an upgrade or a downgrade, and ESG
factors (where they are a key driver behind the change to the
credit rating or rating outlook) can be found in the full rating
report referenced above.
A description of all substantially material sources that were
used to prepare the credit rating and information on the
methodology(ies) (inclusive of any material models and sensitivity
analyses of the relevant key rating assumptions, as applicable)
used in determining the credit rating is available in the
Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be
located here.
Further disclosures relating to this rating action are available
in the Information Disclosure Form(s) referenced above. Additional
information regarding KBRA policies, methodologies, rating scales
and disclosures are available at www.kbra.com.
About KBRA
Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit
rating agency registered with the U.S. Securities and Exchange
Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is
registered as a CRA with the European Securities and Markets
Authority. Kroll Bond Rating Agency UK Limited is registered as a
CRA with the UK Financial Conduct Authority. In addition, KBRA is
designated as a designated rating organization by the Ontario
Securities Commission for issuers of asset-backed securities to
file a short form prospectus or shelf prospectus. KBRA is also
recognized by the National Association of Insurance Commissioners
as a Credit Rating Provider.
Doc ID: 1004283
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Analytical Contacts
Samuel Stuart, Director (Lead Analyst) +1 646-731-1298
samuel.stuart@kbra.com
Laura Wolinsky, Senior Director +1 646-731-2379
laura.wolinsky@kbra.com
Nitin Bhasin, Senior Managing Director, Global Head of CMBS
(Rating Committee Chair) +1 646-731-2334 nitin.bhasin@kbra.com
Business Development Contact
Daniel Stallone, Managing Director +1 646-731-1308
daniel.stallone@kbra.com