Private equity firm KSL Capital Partners has secured $553 million in financing for a 23-property hotel portfolio, marking its second major hospitality refinancing this fall.
The transaction includes a $440 million senior mortgage loan and $113 million in mezzanine debt. Wells Fargo and Bank of Montreal originated the deal through commercial mortgage-backed securities offering KSL 2025-MH, according to Moody’s Investors Service analysis.
The deal demonstrates continued investor appetite for select-service hotel debt, despite volatility in the asset class.
U.S. hotel revenue per available room dropped 2.1% in September, the sharpest monthly deceleration since 2022, CoStar data shows. It also marked the second consecutive quarter of declines.
The outlook for the fourth quarter is also muted. The hotel industry is experiencing malaise, as monthly room demand has barely surpassed last year’s results, according to a CoStar analysis. The lack of healthy demand growth does not give operators pricing power, so room rates declined by 0.1% in September and have only grown 0.9% year to date.
However, KSL's ability to secure two refinancings totaling more than $1 billion within three months signals some confidence in the lodging sector's fundamentals.
In September, KSL closed a $480 million refinancing package for two luxury Hawaii resorts through Wells Fargo Commercial Mortgage Trust 2025-HI. That transaction extracted nearly $148 million in equity from the Outrigger Reef Waikiki Beach Resort and Sheraton Kauai Coconut Beach Resort.
KSL declined to comment to CoStar News.
The latest refinanced portfolio spans 3,028 guest rooms across 13 states. Properties operate under Marriott, Hilton and Hyatt brands as select-service and extended-stay hotels.
Georgia represents the largest concentration with four properties totaling 554 guest rooms.
The portfolio's largest asset is the 230-room Hampton Inn & Suites Myrtle Beach Oceanfront in Myrtle Beach, South Carolina, accounting for 9.6% of cash flow and 12% of the allocated loan amount.
KSL will maintain about $184 million in equity following the refinancing, according to Moody’s.
The firm acquired the properties between 2021 and 2023, investing $45.2 million in capital improvements. An additional $31.4 million in brand-mandated upgrades are planned during the loan term, Moody’s said.
Newmark's Valuation & Advisory group prepared individual appraisals for each property this past September. Newmark concluded an “as-is” market value of the individual properties in the portfolio totaling $741.8 million.