Blackstone and Starwood Capital Group are heading back to Wall Street to refinance a sprawling portfolio of budget hotels.
The investment giants’ joint venture, ESH Hospitality, is preparing a $1.94 billion CMBS offering secured by debt on 220 Extended Stay America hotels in 33 states, according to a KBRA loan analysis. The portfolio totals 24,560 keys, representing a large portion of the brand’s U.S. footprint, Bisnow reported.
JPMorgan Chase and Citi are expected to originate half the debt; Goldman Sachs, Wells Fargo, Bank of America and a Deutsche Bank affiliate would split the rest. The notes are likely to close before the end of November, KBRA reported.Â
The securitization is underwritten at a 65.4 percent loan-to-value ratio and an 8.27 percent cap rate. The Class A bonds are rated AAA. The two-year, interest-only loan comes with three one-year extension options and is priced at an estimated 250 basis points above the secured overnight financing rate and an expected 0 percent floor.Â
Blackstone and Starwood must also secure an interest rate cap at no higher than 7 percent to guard against further volatility.
Half the portfolio’s square footage is concentrated in Florida, California, New Jersey, Maryland and Massachusetts. Properties average 25 years in age, featuring room counts ranging from 68 to 161. Occupancy in the trailing 12 months was 77 percent, generating a revenue per available room of $60.13. Performance has seesawed in recent years due to pandemic-related disruptions.
Blackstone and Starwood acquired Extended Stay America for about $6 billion in 2021. The private-equity firms paid $19.50 per share for the hotel operator, following previous investments in the hotel chain by each company.
The offering comes as the hospitality market continues its split recovery. Luxury hotels are setting record room rates thanks to high-end leisure demand, but extended stay, midscale and economy operators have been slower to rebound as cost-conscious travelers resist spending.
— Holden Walter-Warner
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