KBRA Assigns Ratings to HYT 2024-RGCY

KBRA announces the assignment of ratings to nine classes of HYT 2024-RGCY, a CMBS single-borrower securitization.

The collateral for the transaction is a $620.0 million non-recourse, first lien mortgage loan that was co-originated by Wells Fargo Bank, National Association, Bank of America, N.A. and German American Capital Corporation. The floating rate loan has a two-year initial term with three 12-month extension options and requires monthly interest-only payments. The mortgage loan is secured by the borrower’s fee simple interest in the Hyatt Regency Orlando, a 1,641-key, AAA Four Diamond, full-service convention hotel located on 28.2 acres along International Drive in Orlando, Florida. The property is strategically positioned across the street from both phases of the Orange County Convention Center (OCCC) and is connected by elevated walkways to both concourses. The hotel’s facilities and amenities include six food & beverage outlets, over 351,000 sf of meeting and ballroom space, two outdoor pools, a full-service spa, a fitness facility, and a business center. The property was built in 1986 and expanded in 2010. Since 2016, the seller has invested approximately $116.9 million on renovations, which included guestroom renovations in 2017 and 2018, with spending in recent years focused on F&B outlets and building infrastructure. Upon acquisition of the property, the sponsors are planning approximately $60.0 million ($36,563 per key) of elective renovations which will upgrade the guestrooms and pool areas. For the TTM 6/2024 period, the subject property achieved an occupancy of 79.7% with an ADR of $228.59, resulting in a RevPAR of $182.13. The property achieved occupancy, ADR and RevPAR penetration rates of 118.4%, 100.7% and 119.2%, respectively, as of the TTM 6/2024 period.

KBRA’s analysis of the transaction included a detailed evaluation of the property’s cash flows using our North American CMBS Property Evaluation Methodology, and the application of our North American 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 $69.8 million, which is 10.1% below the issuer’s NCF, and a KBRA value of approximately $715.9 million, which is 31.8% below the appraiser’s as-is value. The resulting in-trust KBRA Loan to Value (KLTV) is 86.6%. 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.

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Methodologies