Morgan Stanley, Deutsche Bank roll out $515m Hawaii resort CMBS

Sponsors Trinity Investments and Oaktree Capital management obtained the loan to refinance existing debt.

Morgan Stanley and Deutsche Bank rolled out a $515 million commercial mortgage-backed securities deal backed by The Westin Maui Resort & Spa, Ka’anapali, a Maui resort owned by a partnership between Trinity Investments and Oaktree Capital Management.

The sponsors lined up the loan to refinance $360 million of maturing debt and comes after Trinity and Oaktree completed a $120 million renovation and repositioning of the 771-key luxury resort. Eastdil Secured arranged the loan for the partners, which acquired the property in 2017. The loan was priced at 7.755 percent.

Sean Hehir, managing partner, president and chief executive of Trinity, noted the financing came at a time when the group leisure destination travel market remains strong.

A pre-sale report from Standard & Poor’s said the deal, WSTN Trust 2023-Maui, has a 78.5 percent loan-to-value ratio, a level the New York-based rating agency said was based on an appraisal of 56 percent. “Our long-term sustainable value estimate is 28.6 percent lower than the appraiser’s valuation,” the report stated.

The 1971 vintage property is located on the beachfront of Ka’anapali Beach in Maui and has amenities that include outdoor pools, waterslides and several retail outlets, which S&P viewed as a strength in its rating. There are also significant barriers to entry in the luxury hotel market in that part of Maui, the report stated.

Potential risks include a debt-service-coverage ratio of 1.38x, a level S&P viewed as moderately low. Additionally, the loan is interest-only for its entire four-year term, presenting higher refinancing risk.