Morgan Stanley Looks to Restructure CMBS
The Wall Street Journal reports: A real-estate fund managed by Morgan Stanley is trying to restructure a $1 billion securitized mortgage on five resorts it bought in 2007 in the latest example of a bad commercial-property bet made by the firm.
Morgan Stanley's $1.75 billion MSREF V U.S. fund bought eight resorts at the top of the market from CNL Hotels & Resorts Inc. It put $1.52 billion of debt on five of the properties, including a $1 billion first mortgage and a $525 million mezzanine loan. The first mortgage was carved up and sold to investors as commercial mortgage-backed securities, a popular form of financing during the boom.
But the five resorts have been hammered along with the rest of the luxury-hotel market by the economic downturn, making it difficult for them to pay debt service and possibly even operating costs.
Morgan Stanley was among the most aggressive buyers of real estate during the boom of earlier this decade. Its real-estate investing group bought at least $53 billion of property and sold only $14 billion between 2005 and 2007, according to Real Capital Analytics. Now, those deals made at the top of the market are dogging Morgan Stanley as property values plummet, rents decline and refinancing options remain scant. Most of that real estate was purchased by its Morgan Stanley Real Estate Funds unit, known in the industry as MSREF.
The five resorts include the 780-room Grand Wailea Resort Hotel & Spa in Maui; the 796-room La Quinta Resort & Club and PGA West in La Quinta, CA.; the 739-room Arizona Biltmore Resort & Spa in Phoenix; the 693-room Doral Golf Resort & Spa in Miami; and the 279-room Claremont Resort & Spa in Berkeley, CA.
View the full article on The Wall Street Journal: Morgan Stanley Looks to Restructure CMBS
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Posted by: Matthew Stone