KBRA announces the assignment of preliminary ratings to nine classes of ARZ 2024-BILT, a CMBS single-borrower securitization.

The collateral for the transaction is a $460.0 million non-recourse, first lien mortgage loan that was co-originated by Morgan Stanley Bank, N.A., Deutsche Bank AG, New York Branch, and JPMorgan Chase Bank, National Association.. The fixed rate loan has a five-year term and requires monthly interest-only payments that will be based on a 7.32% coupon. The mortgage loan will be secured by the borrower’s fee simple interest in the Arizona Biltmore located in Phoenix, Arizona, the borrower’s leasehold interest in a portion of the common areas at the Arizona Biltmore Hotel Villas Condominium, the rental management income payable to the borrower, and all intellectual property directly related to the trademark “Arizona Biltmore” held by the borrower. The subject property features 593 collateral keys as well as 112 keys that are contained within 56 vacation villas that participate in a hotel-managed rental program. The hotel was originally constructed in 1929 under the influence of Frank Lloyd Wright and his protégé Albert Chase McArthur. Facilities and amenities include seven food & beverage outlets, approximately 184,000 sf of meeting space, seven pools, a variety of water slides, a 28,000 sf full-service spa, a fitness facility, tennis and pickleball courts, and five retail shops. Since 2018/2019, the property has received a comprehensive $165.3 million renovation ($278,711 per collateral key), which included $125.0 million ($210,793 per collateral key) to upgrade the guestrooms, renovate and reconcept the food & beverage outlets, refresh the meeting spaces, and improve the pool and aquatic offerings. For the TTM 3/2024 period, the property achieved an occupancy of 68.7% with an ADR of $385.28, resulting in a revenue per available room (RevPAR) of $264.74. As of year-end 2023, the subject property achieved occupancy, ADR and RevPAR penetration rates of 111.6%, 107.5% and 120.0%, 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 $42.5 million, which is 12.7% below the issuer’s NCF, and a KBRA value of approximately $447.0 million, which is 36.7% below the appraiser’s as-is value. The resulting in-trust KBRA Loan to Value (KLTV) is 102.9%. 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.

Click here to view the report.

Methodologies

• CMBS: U.S. CMBS Property Evaluation Methodology
• CMBS: U.S. CMBS Single Borrower & Large Loan Rating Methodology
• Structured Finance: Global Structured Finance Counterparty Methodology
• CMBS: Methodology for Rating Interest-Only Certificates in CMBS Transactions
• ESG Global Rating Methodology

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

Doc ID: 1004283

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