DBRS Finalizes Ratings on COMM 2012-MVP

DBRS has today assigned final ratings to the following classes of Commercial Mortgage Pass-Through Certificates (the Certificates) issued by COMM 2012–MVP Mortgage Trust. The trends are Stable.

– Class A at AAA (sf)
– Class X-A-CP at AAA (sf)
– Class X-A-EXT at AAA (sf)
– Class X-B-CP at AAA (sf)
– Class X-B-EXT at AAA (sf)
– Class B at AA (low) (sf)
– Class C at A (sf)
– Class D at BBB (sf)
– Class E at BBB (low) (sf)

All classes have been privately placed pursuant to Rule 144a.

The Class X-A-CP, X-A-EXT, X-B-CP and X-B-EXT balances are notional. DBRS ratings on interest-only certificates address the likelihood of receiving interest based on the notional amount outstanding. DBRS considers the interest-only certificate’s position within the transaction payment waterfall when determining the appropriate rating.

The $294.7 million mortgage loan is secured by a portfolio of three full-service hotels – Sheraton Dallas, Sheraton Denver and Hyatt Regency St. Louis – located in distinct urban markets. In addition to the mortgage loan, there is $114.9 million of subordinate mezzanine debt outside of the trust consisting of a $64.9 million senior mezzanine loan and a $50.0 million junior mezzanine loan. The mortgage loan and mezzanine loans amortize on 30-year schedule with an assumed 6.000% interest rate. The loan sponsors purchased the properties as part of a larger portfolio in 2008 for $479.1 million and have subsequently spent $200.5 million on capital improvements, bringing their total cost basis to $679.6 million. The proceeds of the subject financing will be used, along with approximately $22 million of new cash equity, to pay off prior debt of $397 million, pay closing costs and fund upfront reserves. All three properties were operating under the now-defunct Adam’s Mark brand at the time of acquisition, and the sponsors have successfully re-flagged the properties as two Sheratons and a Hyatt.

The loan has minimal default risk during the four-year fully-extended loan term, as the DBRS Term debt service coverage ratio (DSCR) is high at 2.27 times (x). DBRS value, a 24.5% discount to the appraised value, results in a low DBRS loan-to-value (LTV) of 59.9%. In addition, the mortgage loan per key at $74,028 is very low, given the significant renovations performed since acquisition and the urban location of the properties. The appraiser’s estimate of replacement cost for insurable value, which excludes land value, is $890.0 million. The mortgage loan amount represents a 67% discount to this estimate of replacement, and, including land value, would provide an even greater cushion. Each property consists of multiple components with varying opening dates, but the first phases of each property are all at least 50 years old. However, since acquisition the sponsors have invested $200.5 million in capital expenditures across the portfolio to modernize the properties. This amounts to approximately $50,000 per key and represents 68% of the mortgage loan amount. Based on DBRS site inspections and management tours of each of the three properties, they are all in good condition with very minimal deferred maintenance.

The ratings assigned to the Certificates by DBRS are based exclusively on the credit provided by the transaction structure and underlying trust assets. All classes will be subject to ongoing surveillance, which could result in upgrades or downgrades by DBRS after the date of issuance.

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

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The Rule 17g-7 Report of Representations and Warranties is hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

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