DBRS Assigns Provisional Ratings to Extended Stay America Trust 2010-ESH

DBRS has today assigned provisional ratings to the following classes of Extended Stay America Trust, Series 2010-ESH. The trends are Stable.

-- Class A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class XA-1 at AAA (sf)
-- Class XA-2 at AAA (sf)
-- Class XB-1 at BBB (sf)
-- Class XB-2 at BBB (sf)

The collateral consists of a $2.0 billion fixed-rate loan secured by 664 extended stay hotels located in 44 states and two Canadian provinces. The loan served as financing for the $3.925 billion acquisition of the subject properties by investor groups led by Paulson Advantage Plus Master Ltd. (Paulson), Centerbridge Capital Partners, L.P. (Centerbridge) and several Blackstone Real Estate Partners funds (BREP). In addition to the $2.0 billion of mortgage debt, which is being contributed to the trust, there is a $350 million senior mezzanine loan and a $350 million junior mezzanine loan secured by the equity interests in the borrowers. The mezzanine loans are subordinate to the mortgage debt.

The loan benefits from significant cash equity contributed by the sponsors, extreme granularity of the underlying portfolio of hotels, very high net cash flow margins, and the fact that the DBRS UW NCF is based on performance that is just slightly improved from the cyclical trough of the worst hotel market since the Great Depression. In addition, when compared to the previous three CMBS transactions that included some or all of the properties included as collateral for this loan, this transaction carries significantly lower leverage based on both debt yield and proceeds per key.

Notes:
All figures are in U.S. dollars unless otherwise noted.

All classes are privately placed pursuant to Rule 144A.

The applicable methodology is CMBS Rating Methodology, which can be found on our website under Methodologies.