DBRS Confirms All Classes of Hyatt Hotel Portfolio Trust 2017-HYT2

DBRS Limited (DBRS) confirmed the ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2017-HYT2 (the Certificates) issued by Hyatt Hotel Portfolio Trust 2017-HYT2 as follows:

-- Class A at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (sf)
-- Class D at A (low) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (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. The subject transaction closed in October 2017 with a trust balance of $389.5 million, which was part of a $582.5 million three-year, interest-only, floating-rate loan secured by the fee and leasehold interests in a portfolio of 38 select-service and extended-stay hotels operating under the Hyatt Place and Hyatt House flags. Loan proceeds of $510.0 million refinanced existing debt previously securitized in HYATT 2015-HYT, returned equity to the sponsors and established $7.9 million of upfront reserves. The loan features two one-year extension options based on certain performance conditions.

The portfolio benefits from its granularity by loan size and market, with 38 hotels across 21 states and 27 MSAs. No property comprises more than 5.0% of the total allocated loan amount. According to recent reporting, the portfolio generated a trailing 12-month March 2018 debt service coverage ratio (DSCR) of 2.16 times (x), compared with the year-end (YE) 2017 DSCR of 2.18x, YE2016 DSCR of 2.18x and DBRS Term DSCR of 1.94x derived at issuance. The primary haircut driver for the lower DBRS Term DSCR was attributed to an occupancy rate cap applied across the portfolio.

Approximately 91.5% of the pool balance, comprising 31 properties, reported March 2018 Smith Travel Research (STR) reports and 8.5% of the pool balance, comprising two properties, reported December 2017 STR reports. Per the STR reports, there were 33 properties, representing 87.3% of the loan balance, that exhibited revenue-per-available-room (RevPAR) penetration indexes above 100.0%. The most recent STR reports for the portfolio stated an occupancy rate, average daily rate (ADR) and RevPAR of 79.4%, $127.30 and $101.71, respectively, which is a slight improvement from the previous year’s figures of 78.7%, $126.55 and $99.74, respectively.

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.
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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.

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