DBRS Confirms All Classes of CSMC Trust 2017-CHOP

On August 15, 2018, DBRS amended the notes section of this press release and the principal methodology listed for this transaction.

DBRS Limited (DBRS) confirmed the ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2017-CHOP (the Certificates) issued by CSMC Trust 2017-CHOP as follows:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which has remained in line with DBRS’s expectations since issuance. This deal closed in June 2017, with an original trust balance of $780 million. Loan proceeds, along with approximately $79.1 million of equity from the sponsors, were used to refinance existing commercial mortgage-backed security (CMBS) debt. Remaining proceeds were used to pay closing costs and fund an upfront property improvement plan (PIP) reserve of approximately $16.0 million ($2,493 per key). The first mortgage is a 24-month term floating-rate (one-month LIBOR plus 3.30% per annum) interest-only mortgage loan, with three 12-month extension options. The collateral set remains unchanged from issuance and consists of 48 select-service, limited-service and extended stay hotels, totalling 6,401 keys across 21 different states. The portfolio benefits from a diverse collateral set operating in different markets and under multiple hotel brands and flags (including Marriott, Hilton and Hyatt-branded chains) making it less volatile to any one variable.

At issuance, the transaction had a DBRS Term Debt Service Coverage Ratio (DSCR) and DBRS Debt Yield of 1.19 times (x; based on a DBRS NCF figure of $58,475,437 and a stressed interest rate of 6.3%) and 7.5%, respectively. The servicer’s year-end 2017 analysis shows an in-place DSCR of 1.82x, with NCF growth of 8.2% over the DBRS NCF figure derived at issuance. The largest 15 properties by allocated loan balance reported a weighted-average DSCR of 1.90x, with RevPAR penetration above 100% for all 15 properties as of the most recent Smith Travel Research reports on file.

As noted at issuance, the sponsor expects to invest nearly $70.0 million in improvements across the portfolio over the next five years, inclusive of both brand-required property improvement plans (PIPs) and elective upgrades for the collateral properties. Two notable renovation projects began in 2018 for the Courtyard Dunn Loring Fairfax property (lobby and room upgrades at a cost of $3.5 million) and the Residence Innn Nashville Airport property (lobby upgrades at a cost of approximately $995,000). Both reported a healthy YE2017 NCF figure and coverage ratio on the allocated debt amount, with the respective projects expected to be complete within the near term. The Loan Level Reserve report for June 2018 shows a Furniture, Fixtures and Equipment reserve amount of just $4,063 after a $552,211 disbursement for the same month. DBRS has asked the servicer to confirm the remaining amount (if any) for the $16.0 million PIP reserve collected at issuance and will provide those updates on the DBRS Viewpoint platform as information is received.

Classes X-CP and X-EXT are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

All ratings will be subject to ongoing surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

As part of this review, DBRS has provided updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following properties included in this transaction:

-- Courtyard Dunn Loring Fairfax
-- Residence Inn Nashville Airport

This commentary is housed under the Loan Commentary section for this deal. For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes loan level data for the entire CMBS universe, as well as deal and loan-level commentary for all DBRS rated transactions.

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

The principal methodology is CMBS North American Surveillance, which can be found on dbrs.com under Methodologies. For a list of the Structured Finance related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document on www.dbrs.com. Please note that not every related methodology listed under a principal Structured Finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

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 under Related Documents or by contacting us at info@dbrs.com.

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

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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