CMBS Hot For Limited Service
Limited-service hotels are all the rage(who needs all that messy commitment of a full-service?)and thats even extended to CMBS financing. KeyBank Real Estate Capital head of CMBS originations and investor placement Dan Baker tells us that the sub-sector makes up the bulk of hospitality financing within his platform, and he expects to originate $250M to $300M of those deals this year. Theres been heavy appetite and pent-up demand for limited-service hotels, in particular, because its difficult to get construction financing for new hotels; CMBS spreads have come in dramatically over the past 45 to 60 days; and interest rate activity has spurred strong investment interest. Leverage has also risen from 60% to 65% in 2012 to 65% to 75% this year.
Many of those deals have been in geographically spread portfolios, like two CMBS loans KeyBank recently closed for affiliates of Summit Hotel Properties. (A bulk of KeyBanks hotel clients are REITs and regional operators). The loanswhich totaled nearly $45M, were secured by five Hyatt Place and one Hyatt House properties in Florida, Illinois, Colorado, Arizona, and Maryland. Dans also working on originating a loan for eight Marriott limited-service hotels in four different markets. The diversification is treated favorably in securitization and takes risk away from secondary and tertiary markets, he says. That means a lot of traveling for Dan (and reading on the planehes currently leafing through Ken Folletts Fall of Giants).