KBRA Assigns Preliminary Ratings to PGA 2024-RSR2
21 May 2024 | New York
KBRA announces the assignment of preliminary ratings to 10 classes of PGA 2024-RSR2, a CMBS single-borrower securitization.
The collateral for the transaction is a $315.0 million non-recourse, first lien mortgage loan that is expected to be co-originated by Morgan Stanley Bank, N.A. and Wells Fargo Bank, National Association. The floating rate loan is expected to have a two-year initial term with three 12-month extension options and require monthly interest-only payments. The mortgage loan will be secured by the borrower’s fee simple interest in PGA National Resort, located in Palm Beach Gardens, Florida. The subject property, which opened in 1981, features 360 keys, eight food & beverage outlets, six golf courses totaling 99 holes, golf clubhouse, approximately 60,000 sf of meeting space, four pools, a 40,000 sf full-service spa, a 35,000 sf fitness, sports and racquet club facility with 16 tennis courts, 12 pickleball courts and a five-lane swimming pool, and several retail shops. The property also features a private membership club and vacation home rentals that participate in a hotel-managed rental program. Between 2019 and 2023, the property underwent a $113.0 million comprehensive renovation. For the TTM 3/2024 period, the subject property achieved an occupancy of 60.9% with an ADR of $324.11, resulting in a revenue per available room (PAR) of $197.43. As of the TTM 1/2024 period, the property achieved occupancy, ADR and RevPAR penetration rates of 96.7%, 103.8% and 100.3%, 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 $28.3 million, which is 15.0% below the issuer’s NCF, and a KBRA value of approximately $283.2 million, which is 40.0% below the appraiser’s as-is value. The resulting in-trust KBRA Loan to Value (KLTV) is 111.2%. 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.
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