KBRA Announces Ratings for BX 2024-SLCT Securitization Deal

KBRA Assigns Preliminary Ratings to BX 2024-SLCT

KBRA has officially announced the assignment of preliminary ratings to several classes of BX 2024-SLCT, indicating a significant step in the CMBS single-borrower securitization market.

Details of the Securitization Transaction

The transaction revolves around a substantial floating-rate mortgage loan amounting to $615 million. This loan is structured with an initial term of two years and includes three options for one-year extensions. It requires only monthly interest payments during this period, providing flexibility for the borrower.

Securing this loan are the interests of the borrowers in 23 hotels. Among these, 20 properties are held as fee simple interests, totaling up to 3,549 keys, which represents a hefty 90.1% of the loan balance. Additionally, leasehold interests in three hotels add another 409 keys, constituting 9.9% of the loan balance. This diverse range of properties guarantees a well-distributed risk across various locations.

Performance Metrics of the Hotel Portfolio

For the period up to September 2024, the hotel portfolio has displayed a commendable occupancy rate of 74.5%. The average daily rate (ADR) achieved during this time stood at $205.64, which translated into a revenue per available room (RevPAR) of $153.16. These metrics are vital indicators of the portfolio's overall health and profitability.

Moreover, the portfolio witnessed weighted average penetration rates—101.3% for occupancy, 97.0% for ADR, and 98.4% for RevPAR—showing that these properties are performing above market expectations.

Methodologies Used in Analysis

In evaluating this transaction, KBRA utilized a comprehensive approach that involved analyzing the cash flows from the hotels through its established methodologies. The North American CMBS Property Evaluation Methodology and the North American CMBS Single Borrower & Large Loan Rating Methodology were instrumental in this detailed assessment. Furthermore, KBRA incorporated its Global Structured Finance Counterparty Methodology to evaluate counterparty risks effectively.

Thus, the outcome of this analysis led to the determination of a KBRA net cash flow (KNCF) for the portfolio of approximately $73.9 million, indicating a 4.3% decrease from the issuer's expected NCF. The assessed KBRA value came out to approximately $705.6 million, which is significantly lower than the total appraiser’s as-is valuations by 45.9%. Consequently, this means the resulting in-trust KBRA Loan to Value (KLTV) stands at 87.2%, reflecting prudent lending practices.

Results and Additional Findings

KBRA’s thorough analysis also took into account multiple third-party reports. This included factors such as engineering assessments, environmental evaluations, and property appraisals. The importance of site inspections and a review of the legal documents cannot be understated, as they provided further insight into the transaction's overall risk profile.

Credit ratings and relevant documentation can be found on KBRA's official channels where they regularly publish updates and reports.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) operates as a comprehensive credit rating agency, recognized widely for its rigorous analytical practices. Registered with the U.S. Securities and Exchange Commission as an NRSRO, KBRA ensures regulatory compliance while also holding recognition from various global financial authorities.

KBRA specializes in asset-backed securities and has established itself as a credible provider of insightful and accurate credit ratings, making it a trusted choice among investors and market participants.

Frequently Asked Questions

What is BX 2024-SLCT?

BX 2024-SLCT is a commercial mortgage-backed securities (CMBS) transaction which has been rated by KBRA.

What was the loan amount in this securitization?

The loan amount for BX 2024-SLCT is $615 million, secured by multiple hotel properties.

How does KBRA evaluate such transactions?

KBRA evaluates transactions through methodologies for cash flow assessment and counterparty risk analysis, among others.

What metrics indicated the health of the portfolio?

The portfolio's occupancy rate, ADR, and RevPAR are key metrics reflecting its financial health and operational success.

What is the significance of the KLTV ratio?

The KLTV ratio indicates the relationship between the total loan amount and the value of the properties, which reflects lending risk.

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