DBRS Confirms All Classes of InTown Hotel Portfolio Trust 2018-STAY

DBRS Limited (DBRS) confirmed all classes of Commercial Mortgage Pass-Through Certificates, Series 2018-STAY issued by InTown Hotel Portfolio Trust 2018-STAY as follows:

-- Class A at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (high) (sf)
-- Class X-CP at AA (low) (sf)
-- Class X-FP at AA (low) (sf)
-- Class X-NCP at AA (low) (sf)
-- Class D at A (high) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance. The $471.0 million trust loan closed in February 2018 and was used to refinance existing commercial mortgage-backed securities (CMBS) debt, return equity to the sponsor and fund reserves and closing costs. The three-year interest-only (IO) loan is secured by 85 extended-stay hotels, totaling 10,764 keys, located in 18 different states across the United States. The hotels are all operated under the InTown Suites flag owned by the loan sponsor, Starwood Capital Group Global LP, which has substantial experience in the hotel sector. The loan is structured with ongoing furniture, fixtures and equipment (FF&E) reserves, with annual collections set at 5.0% of gross revenue. The reserve showed a balance of $5.0 million as of the January 2019 remittance. The DBRS debt service coverage ratio (DSCR) and DBRS Debt Yield metrics derived at issuance for the loan were strong at 2.64 times (x) and 12.2%, respectively. Individual property financial information was limited at the time of this review, which is not uncommon for the recent vintage of the deal. There has been partial-year reporting for some of the properties on the loan, but not all and as such, an updated DSCR for the whole loan has not been provided to date. The servicer reported a trailing six months ending June 2018 DSCR for the loan of 3.59x; the full year-end 2018 reporting is expected in the next few months. At issuance, the DBRS net cash flow (NCF) figure represented a -17.1% variance from the Issuer’s NCF figure, driven primarily by a lower occupancy rate assumed by DBRS for the portfolio of 80.4% and higher FF&E reserves analyzed by DBRS. At issuance, the portfolio was noted to have had an average occupancy rate of 84.1% back to 2007.

The portfolio is geographically diverse with each individual property representing no more than 2.1% of the allocated loan balance. There is a high concentration of collateral properties located in three states (Texas, Florida and Tennessee), representing 53.5% of the loan balance. Texas has the highest concentration for a single state, with properties representing 30.3% of the allocated loan balance. The top 15 hotels by allocated loan balance represent 18.4% of the trust. The weighted-average occupancy, average daily rate and revenue available per room for these properties at issuance was 80.9%, $48.53 and $39.03, respectively, compared to the trailing-12 months ending September 2018 figures of 82.2%, $50.58 and $41.42, respectively. The top 15 properties have shown growth in all three metrics since issuance.

Classes X-CP, X-FP and X-NCP 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 are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

DBRS has not provided loan level commentary in the DBRS Viewpoint platform for this transaction as the collateralized properties are relatively granular with the largest property representing 2.1% of the loan balance. In addition, the limited provided information suggests there are no material updates to disclose at this time.

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

The principal methodology is North American CMBS Surveillance Methodology, which can be found on www.dbrs.com under Methodologies & Criteria. 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, which can be found on www.dbrs.com in the Commentary tab under Regulatory Affairs. 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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

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

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