KBRA Assigns Ratings for HIH 2024-61P Securitization Deal
Insights on KBRA's Ratings for HIH 2024-61P
KBRA has recently announced the assignment of preliminary ratings for HIH 2024-61P, a single-borrower commercial mortgage-backed securities (CMBS) transaction that stands out due to its diverse collateral base, specifically 61 hotels across various regions.
Understanding the Loan Structure
This transaction involves a substantial floating-rate mortgage loan amounting to $423.6 million. The loan is designed as interest-only for the initial two years, with options for three additional one-year extensions. Monthly interest payments allow for flexibility in managing cash flow for the borrower.
Collateral Overview
The mortgages are secured by 61 hotel properties, including fee simple interests in 58 properties with a total of 4,725 rooms, which account for about 95.2% of the total loan balance. Additionally, there are leasehold interests in three hotels contributing another 291 rooms, representing 4.8% of the loan. This diversification enhances the investment's resilience.
Portfolio Performance Metrics
As of the trailing twelve months (TTM) ending in June 2024, the hotel's overall performance reflects a respectable occupancy rate of 70.4%. The average daily room rate was $128.22, ultimately leading to a revenue per available room (RevPAR) of $90.26. Notably, the portfolio has achieved strong penetration rates: 109.0% for occupancy, 108.5% for ADR, and 118.7% for RevPAR—all indicators of a robust market position.
Analytical Approaches Employed by KBRA
KBRA's rating analysis was extensive, incorporating a thorough evaluation of cash flows based on its established North American CMBS Property Evaluation Methodology. Furthermore, they implemented their methodology for large loans and single borrowers to assess the unique risks involved.
Cash Flow Assessment and Valuation
The comprehensive analysis produced a KBRA net cash flow (KNCF) for the portfolio estimated at $42.8 million, which is 7.7% lower than the issuer's projected net cash flow. The portfolio's KBRA value was approximated at $373.2 million, reflecting a 38.7% discount compared to the aggregate appraised values from a third-party appraiser for the properties.
Understanding the Loan to Value Ratio
The analysis determined an in-trust KBRA Loan to Value (KLTV) ratio of 113.5%, indicating a level of leverage that could be a point of concern for potential investors but also demonstrating the significant asset backing the loan.
Methodologies and Disclosure Practices
To ensure transparency in their ratings, KBRA guarantees access to detailed methodologies including evaluations of ESG factors where applicable. This commitment to clarity helps investors make informed decisions based on credit ratings and sensitivity analyses that outline potential risks affecting future ratings.
Comprehensive Reporting Practices
Further insights into the methodologies used for calculating credit ratings and related considerations can be found in their comprehensive Information Disclosure Forms. These disclosures underpin the integrity of the rating process.
About Kroll Bond Rating Agency
Kroll Bond Rating Agency, LLC (KBRA) operates as a full-service credit rating agency, registered with the U.S. Securities and Exchange Commission. They have earned recognition as a designated rating organization by the Ontario Securities Commission. Their commitment to quality ratings and analytics extends globally, ensuring that they meet the needs of a broad range of market participants.
Frequently Asked Questions
What is HIH 2024-61P?
HIH 2024-61P is a single-borrower CMBS transaction composed of a mortgage loan secured by 61 hotel properties.
What are the loan terms for HIH 2024-61P?
The loan has a $423.6 million floating rate and an initial interest-only payment term of two years, with options for three one-year extensions.
How is the portfolio performing?
As of June 2024, the portfolio reported a 70.4% occupancy rate, with a daily room rate averaging $128.22.
What is the KLTV ratio for this transaction?
The in-trust KBRA Loan to Value (KLTV) ratio for HIH 2024-61P is reported at 113.5%.
Why are KBRA’s ratings significant?
KBRA’s ratings provide critical insights into creditworthiness, helping investors make informed decisions regarding potential risks and rewards.
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Disclaimer: The content of this article is solely for general informational purposes only; it does not represent legal, financial, or investment advice. Investors Hangout does not offer financial advice; the author is not a licensed financial advisor. Consult a qualified advisor before making any financial or investment decisions based on this article. The author's interpretation of publicly available data shapes the opinions presented here; as a result, they should not be taken as advice to purchase, sell, or hold any securities mentioned or any other investments. The author does not guarantee the accuracy, completeness, or timeliness of any material, providing it "as is." Information and market conditions may change; past performance is not indicative of future outcomes. If any of the material offered here is inaccurate, please contact us for corrections.
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