KBRA Assigns Ratings to ARZ 2024-BILT
23 May 2024 | New York
KBRA announces the assignment of 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 re-concept 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.