DBRS Confirms All Classes of GS Mortgage Securities Corporation Trust 2017-SLP

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

-- Class A at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class X-B at BBB (high) (sf)
-- Class D at BBB (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance. This deal closed in October 2017, with an original trust balance of $725 million. The debt stack comprises two senior notes, with the A-1 and B notes held inside the trust and the A-2 and A-3 notes held outside the trust. The loan is structured with a five-year term and is interest-only (IO) throughout, with no extension options. Following a one-year lockout period and upon the sale of one or more properties to a third party, the sponsor may prepay the loan in whole or in part by paying the allocated loan amount(s) plus a premium, which increases as additional amounts are prepaid.

The collateral consists of 138 limited-service, extended-stay and full-service hotels located in 27 different states and across 84 unique metropolitan statistical areas nationwide. As of the August 2018 remittance, none of the properties have been released from the pool. The portfolio benefits from its extreme granularity as no property represents more than 2.5% of the total allocated loan amount. The assets are managed by three national operators: Aimbridge Hospitality (9,302 keys), Hersha Hospitality (726 keys) and Schulte Hospitality (548 keys). The sponsor for this portfolio is Starwood Capital Group, which acquired the portfolio from various affiliates in 2015.

Each property in the portfolio has been renovated at some point within the last several years or is currently undergoing a capital expenditure (capex) plan. More than $185.2 million ($17,514 per key) has been invested in property improvement plan renovations and elective capex since 2012, $80.7 million ($7,634 per key) of which has been invested by the sponsor since 2015. At issuance, it was noted that the sponsor planned to invest an additional $11.8 million ($1,115 per key) through year-end 2017 and an additional $34.2 million ($3,238 per key) through 2022. Per the trailing 12 months (T-12) ended March 2018 consolidated Smith Travel Research reports, the portfolio reported a weighted-average (WA) occupancy, average daily rate and revenue per available room (RevPAR) of 74.4%, $110 and $82, respectively, compared with the T-12 ending June 2017 WA figures of 72.7%, $111 and $81, respectively.

Per the March 2018 financials, the loan reported an annualized debt-service coverage ratio (DSCR) of 1.71 times (x), in comparison with the DBRS Term DSCR at issuance of 2.12x. The reported DSCR is indicative of normal seasonality trends present in the first three months of the year in the lodging industry. Given the consistent RevPAR performance since issuance, DBRS expects that the annual performance of the portfolio will remain consistent with expectations at issuance when a full T-12 analysis is available.

Classes X-A and X-B are 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 this transaction.

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.

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.