DBRS Upgrades One and Confirms Eight Classes of COMM 2012-MVP Mortgage Trust

DBRS has today upgraded the following class of Commercial Mortgage Pass-Through Certificates, Series 2012-MVP issued by COMM 2012-MVP Mortgage Trust as follows:

-- Class B to AA (high) (sf) from AA (low) (sf)

DBRS has also confirmed the ratings of the following classes:

-- 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 C at A (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)

All trends are Stable.

The rating upgrade reflects the increased credit enhancement to the bonds as a result of the full prepayment of the allocated loan balance securing the Hyatt Regency St. Louis at the Arch in addition to scheduled portfolio loan amortization. The Hyatt Regency St. Louis at the Arch represented approximately 16% of the first mortgage loan at issuance and was prepaid in full with the October 2014 remittance. As a result, the first mortgage loan has experienced total collateral reduction of 31.3% since issuance. The remaining collateral for the loan consists of two full service hotels: the Sheraton Dallas and Sheraton Denver Downtown, both of which are discussed in greater detail below.

The Sheraton Dallas is a 1,840-key full-service hotel comprising three towers of 42, 28 and 31 stories, respectively as well as a three-story convention center located adjacent to the subject across the street, accessible via a connected walkway. The subject’s allocated loan balance accounts for 51.6% of the remaining first mortgage loan balance and is the largest hotel in the area, representing 28% of the total supply in its competitive set. According to the June 2014 Smith Travel Research (STR) report, the subject continues to underperform its competitive set, which remains an ongoing trend since issuance. The trailing 12 months (T-12) occupancy rate, average daily rate (ADR) and revenue per available room (RevPAR) were reported at 57.3%, $122.21 and $70.08, respectively, compared with the competitive set’s figures of 60.5%, $153.92 and $93.15, respectively. While the subject has shown a 17.9% improvement in occupancy and a 13.2% improvement in RevPAR over the previous 12-month period, performance remains below the competitive set because of the large number of rooms at the subject. The hotel is the largest in the competitive set, with 233.3% more rooms than the average hotel in its competitive set. As a result, the subject is forced to offer rooms at lower rates to maintain occupancy; therefore, occupancy, ADR and RevPAR will likely continue to trail the competitive set even though the Dallas hotel market continues to improve. The subject’s improvement in 2014 is in part a result of the signing of a contract with a large airline for the year, with the contract for next year currently being negotiated. Hotel management will identify and pursue similar clients as group demand will be key to the hotel’s success. The subject is located one mile from the Dallas Convention Center (DCC); however, it does not capture the bulk of this demand as its main competitor, the Omni Dallas, a 1001-key hotel built in 2011, is located adjacent to the DCC. As a result, the Omni Dallas is the first hotel to fill rooms and the last to have cancellations regarding conference-generated demand from the DCC. Despite the challenges surrounding the hotel in terms of the large room count and less desirable location than the Omni Dallas, the Q2 2014 debt service coverage ratio (DSCR) improved to 3.59 times (x) compared with 2.46x at YE2013. While this improvement may not be reflective of a full year’s performance given the seasonality of hotels, the subject’s improving occupancy and RevPAR metrics appear to be sustainable.

The Sheraton Denver is a 1,231-key full service hotel located three blocks east of the Colorado Convention Center (CCC) in the Denver central business district. The subject’s allocated loan balance accounts for 48.4% of the outstanding portfolio loan and, similar to the Sheraton Dallas, the subject is the largest in its competitive set, representing 23.8% of total supply. According to the June 2014 STR report, the subject had T-12 occupancy, ADR and RevPAR of 73.4%, $146.96 and $107.87, respectively, which compare similarly with its competitive set, which reported figures of 71.9%, $156.64 and $112.60, respectively. The YE2013 DSCR was 3.98x, indicative of net cash flow growth of 17.3% from YE2012. Performance year-to-date through Q2 2014 has improved further, as the partial-year DSCR was 4.27x because of continued growth in rooms as well as food and beverage revenue. The subject continues to benefit from demand generated by the CCC, which hosted 82 events from June 2013 through June 2014. The CCC is expected to host six additional events over the next four years. According to the November 2013 servicer site inspection, the borrower continues to reinvest in the property with completed improvements including a new fire system and boiler enhancements.

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 applicable methodologies are CMBS Rating Methodology (January 2012) and CMBS North American Surveillance Methodology (November 2012), which can be found on our website under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.