Barclays Finances Blackstone Hotel Portfolio With $257M in CMBS Debt


Blackstone Real Estate Income Trust has pinned down a $257 million securitized loan from Barclays Bank to finance a portfolio of 17 U.S. hotels, according to a presale report from Morningstar Credit Ratings, which reviewed the transaction.

Blackstone will pay a floating interest rate of 1.8 percent above Libor during the loan’s initial two-year term, as well as if it opts for any of three one-year extension options. A decision to extend the loan to 48 or 60 months would bump up the spread by another 0.125 percentage points, Morningstar said.

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Headlining the property list is a 240-room Hyatt Place hotel in downtown San Jose, Calif., which, at the southern end of Silicon Valley, is the state’s third-largest city and a hub for the tech sector. Other lodgings financed by the deal include major-branded assets in Nevada, Massachusetts and Florida, most boasting between 100 and 200 rooms. Acquisitive as always, the giant private equity fund bought all 17 of the properties within the last 12 months.

The deal marks Blackstone’s second major lodging-centric CMBS securitization this year, after it landed a $1.1 billion financing on resorts in Arizona, California and Hawaii from J.P. Morgan Chase and Deutsche Bank in May. Those properties—which Blackstone also acquired this year and are not a part of the fund’s REIT— were replete with amenities like golf courses, wedding chapels and beaches.

The hotels included in the current portfolio, on the other hand, offer less opulent service with average daily rates just south of $147. Blackstone asked that the debt be underwritten at a loan-to-value ratio of 59 percent, implying a total portfolio valuation of $435 million. Based on predicted year-end 2018 numbers, overall net cash flow has grown to $34 million from $25 million three years ago, an annual increase of about 13 percent.

In his company’s review of the transaction, Morningstar analyst David Sondesky applauded the fact that most of the portfolio hotels were built in the last 20 years, and that Blackstone and past owners have spent generously on renovations. He cautioned, on the other hand, that gobs of new supply are on the way to some of the markets the portfolio spans, and pointed out that property managers have some discretion to spend receipts as they see fit before passing the remainder along to securities investors.

To the contrary it’s a plus, he said, that the hotels represent a mix of geographies and business models.

A spokeswoman for Blackstone did not immediately respond to an inquiry. Barclays declined to comment.