Blackstone Group LP (BX), the largest U.S. hotel owner, is in talks to borrow about $450 million to refinance debt on San Diego‘s historic Hotel del Coronado to take advantage of lowerinterest rates, a person with knowledge of the plans said.
Blackstone’s real estate unit holds 60 percent of a joint venture that took ownership of the hotel in a February 2011 recapitalization, for which Deutsche Bank AG (DB) provided $425 million of debt financing. The owners have the option to repay that debt after two years, according to the person, who asked not to be identified because the information is private.
Borrowers are benefiting as investor demand for commercial- property debt surges with the Federal Reserve holding its benchmark lending rate at about zero for more than four years. The extra yield bondholders demand to own top-ranked securities linked to everything from skyscrapers to shopping malls rather than Treasuries has fallen to 106 basis points from 199 basis points a year ago, according to a Bank of America Merrill Lynch index.
A $225 million portion of the 2011 loan on the Hotel del Coronado from Deutsche Bank was packaged into bonds alongside other commercial mortgages and sold to investors as part of a $609 million commercial mortgage-backed securities, or CMBS, deal in October 2011, according to data compiled by Bloomberg.
The $225 million, interest-only loan matures on March 9, according to Bloomberg data. It has options for three one-year extensions.
