KBRA Assigns Preliminary Ratings to PGA 2024-RSR2

KBRA announces the assignment of preliminary ratings to 10 classes of PGA 2024-RSR2, a CMBS single-borrower securitization.

The collateral for the transaction is a $315.0 million non-recourse, first lien mortgage loan that is expected to be co-originated by Morgan Stanley Bank, N.A. and Wells Fargo Bank, National Association. The floating rate loan is expected to have a two-year initial term with three 12-month extension options and require monthly interest-only payments. The mortgage loan will be secured by the borrower’s fee simple interest in PGA National Resort, located in Palm Beach Gardens, Florida. The subject property, which opened in 1981, features 360 keys, eight food & beverage outlets, six golf courses totaling 99 holes, golf clubhouse, approximately 60,000 sf of meeting space, four pools, a 40,000 sf full-service spa, a 35,000 sf fitness, sports and racquet club facility with 16 tennis courts, 12 pickleball courts and a five-lane swimming pool, and several retail shops. The property also features a private membership club and vacation home rentals that participate in a hotel-managed rental program. Between 2019 and 2023, the property underwent a $113.0 million comprehensive renovation. For the TTM 3/2024 period, the subject property achieved an occupancy of 60.9% with an ADR of $324.11, resulting in a revenue per available room (PAR) of $197.43. As of the TTM 1/2024 period, the property achieved occupancy, ADR and RevPAR penetration rates of 96.7%, 103.8% and 100.3%, 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 $28.3 million, which is 15.0% below the issuer’s NCF, and a KBRA value of approximately $283.2 million, which is 40.0% below the appraiser’s as-is value. The resulting in-trust KBRA Loan to Value (KLTV) is 111.2%. 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
• CMBS: Methodology for Rating Interest-Only Certificates in CMBS Transactions
• Structured Finance: Global Structured Finance Counterparty Methodology
• 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: 1004401

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