Deutsche Bank Said to Beat Rivals for Hawaiian Resort Financing

Deutsche Bank AG beat at least three other banks vying to lend $1.9 billion to the operator of a group of Hawaiian resorts, according to people with knowledge of the negotiations.

The Frankfurt-based lender, which was competing with Credit Suisse Group AG, JPMorgan Chase & Co. and Citigroup Inc. to underwrite the deal, plans to package the debt into about $1.5 billion of commercial-mortgage bonds, the people said. The transaction will mark the second time in less than two years that Kyo-ya Hotels & Resorts LP, the owner of the five hotels backing the loan, has turned to the market to refinance.

Wall Street firms are seeking out large commercial mortgages that can be packaged into bond deals as investors clamor for real estate debt. The lenders, facing competition from insurance companies and commercial banks for the best U.S. properties, are fighting for financing assignments that are too big for other lenders to manage.

Representatives of Deutsche Bank, Credit Suisse, JPMorgan and Citigroup declined to comment.

Deutsche Bank plans to sell the rest of the Kyo-ya debt to investors as riskier, higher-yielding pieces known as mezzanine loans, said the people, who asked not to be identified because the transaction is private.

Cerberus Capital Management LP, which sold its stake in the company back to Tokyo-based operator Kokusai Kogyo Co. earlier this year, got a $1.8 billion loan from Goldman Sachs Group Inc. in November 2012 that was sold off as securities. A representative of Kokusai Kogyo couldn’t immediately be reached.

Royal Hawaiian

Four of the Kyo-ya hotels are in Hawaii, including the Westin Moana Surfrider and the Royal Hawaiian on Honolulu’s Waikiki Beach. The fifth property is the Palace Hotel in San Francisco.

Hawaii hotels have benefited from increased demand from affluent Asian travelers and visitors from Northern California enriched by the technology-industry boom, according to Honolulu-based Hospitality Advisors LLC, an industry consulting firm. Oahu, which attracts the most visitors of Hawaii’s eight major islands, in February had the highest hotel occupancy among the top 25 U.S. markets, according to Hendersonville, Tennessee-based research firm STR.

An expanding group of lenders are competing for a limited pool of real estate assets, pushing firms to loosen loan terms to meet origination goals set after issuance doubled to $80 billion in 2013.

Wall Street banks are on track to sell about $33.5 billion of securities backed by hotels, shopping malls, apartments and office buildings through May, equivalent to the first five months of 2013, according to Bank of America Corp. analysts led by Alan Todd. At the current rate, issuance will fall short of the $100 billion that analysts were projecting at the start of 2013, Bank of America analysts said in a report last week.

Deutsche Bank was the top underwriter of commercial-mortgage backed securities last year globally, according to industry newsletter Commercial Mortgage Alert. Germany’s largest bank grabbed 21.5 percent of the U.S. CMBS market, followed by JPMorgan with 15.6 percent.

To contact the reporter on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net

To contact the editors responsible for this story: Shannon D. Harrington at sharrington6@bloomberg.net Richard Bravo

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