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Huge $4.65 billion CMBS loan for ESA acquisition

Leave it to Blackstone Real Estate Partners and Barry Sternlicht’s Starwood Capital Group to generate one of the biggest single-asset, single-borrower commercial mortgage-backed securities (CMBS) loans of the past 10 years to finance most of the 560-hotel (62,257-room) Extended Stay America acquisition portfolio. Fully, US$4.65 billion in CMBS debt originated by JPMorgan Chase, Citi and Deutsche Bank will soon hit the market, according to a Fitch Ratings analysis of the deal. 

This will be the largest single-borrower, CMBS financing to be issued since Blackstone Group secured US$5.6 billion in debt in 2019 to finance logistics and light industrial assets that it acquired from GLP for US$18.7 billion.

Blackstone and Starwood are contributing about US$1.64 billion in equity toward their US$5.94 billion acquisition of Extended Stay, which amounts to nearly 27% of the total US$6.2 billion transaction price.

The deal was approved nearly two weeks ago to buy ESA for a boosted bid of US$20.50 per share.

The debt financing is expected to be securitized as part of the ESA 2021-ESH deal and officially close on July 8. The deal is carved into slices, offering investors different levels of risk. Fitch Ratings, along with Moody’s Investors Service and Kroll Bond Ratings, assigned AAA ratings to the two senior tranches of the structure.

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