DBRS Confirms Ratings of SCG 2013-CWP Hotel Issuer Inc., Series 2013-CWP

DBRS Limited (DBRS) has today confirmed the ratings on the following Commercial Mortgage Pass-Through Certificates, Series 2013-CWP issued by SCG 2013-CWP Hotel Issuer Inc., Series 2013-CWP as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class X at AAA (sf)

All trends are Stable. The Class X balance is notional.

The rating confirmations reflect the overall stable performance of the transaction since issuance. The transaction consists of a single mortgage loan, secured by five full-service hotel properties located in five urban Canadian markets: Westin Calgary, Westin Harbour Castle (Toronto), Westin Ottawa, Westin Bayshore (Vancouver) and Westin Edmonton. In addition to the mortgage loan, which has a current balance of $389.9 million, there is also $80.0 million of subordinate mezzanine debt held outside of the trust. As of YE2014 reporting, the portfolio Debt Service Coverage Ratio (DSCR) is 2.45 times (x) and the properties continue to outperform their respective competitive sets in occupancy, average daily rate (ADR) and revenue per available room (RevPAR).

The largest hotel by allocated mortgage loan amount is the Westin Calgary, which is a 525-key full-service hotel located in Calgary, Alberta. Low oil prices negatively impact Calgary’s economy more than any other city in the portfolio. In light of the recent weakness, the Bank of Canada decreased interest rates by 25 basis points in Q1 2015, driving down the Canadian dollar and generating greater demand for cross-border business and leisure travel into Canada. According to a Cushman & Wakefield market report, there are four significant office buildings, representing approximately 1.7 million square feet under construction to be completed in 2015. The weighted-average pre-leased rates for the four office properties was 88.7%. With newer supply coming on line, the subject, which is 41 years old, will need to spend more on capital expenditures to stay competitive. In an attempt to better differentiate themselves and to maintain leadership in their respective competitive set, soft goods, case goods and bathroom renovations are expected in 2016 to reflect Westin’s current motif of light-coloured wood furniture and earth tone decor. The diligent maintenance and renovations have paid off as the October 2014 STR reported a trailing 12-month (T-12) occupancy of 80%, ADR of $233 and RevPAR of $187, which is an improvement to the June 2013 T-12 occupancy of 73.1%, ADR of $228 and RevPAR of $169. The transaction benefits from strong sponsorship and management in Starwood Capital Group and Westin Hotel Management, both of which are sophisticated and experienced operators in the hospitality industry.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction, including details on the largest loans in the pool and loans on the servicer’s watchlist. The June 2015 Monthly CMBS Surveillance Report for this transaction will be published shortly. If you are interested in receiving this report, contact us at info@dbrs.com.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are 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 are North American CMBS Rating Methodology (June 2015) and CMBS North American Surveillance (January 2015), which can be found on our website under Methodologies.

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

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