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CMA
July 26, 2019  

Elliott, Trinity Eye Loan for Phoenix Marriott

An Elliott Management partnership is seeking to borrow about $435 million to finance its pending acquisition of a luxury resort in Phoenix.

Elliott and its partner, Trinity Real Estate Investments, have agreed to buy the 950-room JW Marriott Phoenix Desert Ridge Resort & Spa from Blackstone for $602 million, or $634,000/room.

The partnership wants a five-year mortgage and will consider proposals for both a fixed and floating rate. Eastdil Secured is leading the loan search and also brokering the sale for Blackstone.

The JW Marriott, which carries a four-diamond rating from AAA, was previously financed four times in the commercial MBS market, most recently in late 2017, when Morgan Stanley arranged a $415 million floating-rate debt package. The bank securitized the senior $365 million portion via a stand-alone offering (MSC 2017-JWDR).

The JW Marriott, at 5350 East Marriott Drive in the North Phoenix area, generated $42 million of net operating income last year, when it was 73% occupied, according to a loan-servicer report. That occupancy rate was slightly better than the 71.9% average for comparable properties. Blackstone has spent about $37 million on renovations.

The amenities include two championship golf courses and clubs, five pools, a lazy river and seven restaurants, bars and cafes. There’s also 241,000 square feet of meeting space. The property is part of the master-planned Desert Ridge development, which also has residential and retail components.

The JW Marriott is the second luxury resort that New York-based Elliott and Honolulu-based Trinity are acquiring from Blackstone. In December, the duo bought the 1,580-room Grande Lakes Resort in Orlando for $870 million. That property encompasses a 998-room JW Marriott, a 582-room Ritz-Carlton and a championship golf course. The Elliott team financed the acquisition with a $650 million floating-rate loan from Deutsche Bank and Wells Fargo. The banks securitized the $597 million senior portion (DBWF 2018-GLKS).

The Phoenix and Orlando resorts have been linked for well over a decade. They were formerly owned by CNL Hotels & Resorts of Orlando. In 2007, the team of Morgan Stanley Real Estate, California State Teachers and Florida State Board acquired CNL for $6.5 billion. In 2011, after defaulting, the Morgan Stanley partnership surrendered the properties to the holder of mezzanine debt — an investment group consisting of Paulson & Co. of New York (a 43% stake), Capital Trust of New York (42%) and Winthrop Realty of Boston (14%). In late 2012, Blackstone took control of Capital Trust and assumed its interest.

In 2015, Blackstone bought out its partners in a transaction that valued the properties at $1.2 billion. It financed each resort separately with floating-rate loans, totaling $1 billion, from Deutsche, Barclays and J.P. Morgan. Some $722.4 million of those two debt packages was securitized in a single-borrower deal (BXHTL 2015-JWRZ).