DBRS Morningstar Places North American Single-Asset/Single-Borrower (SASB) Transactions Backed by Lodging Properties Under Review with Negative Implications

DBRS, Inc. (DBRS Morningstar) placed the ratings on its outstanding North American Single-Asset/Single-Borrower (NA SASB) transactions secured by lodging properties Under Review with Negative Implications. DBRS Morningstar placed the relevant NA SASB ratings Under Review with Negative Implications as a result of the negative impact of the Coronavirus Disease (COVID-19) on lodging properties. DBRS Morningstar ratings that are placed Under Review with Negative Implications are typically confirmed or downgraded by a subsequent rating committee.

DBRS Morningstar ratings on NA SASB transactions backed by other property types are not affected by this rating action and remain Under Review with Developing Implications.

Today’s rating action follows a recent DBRS Morningstar commentary, “How the Coronavirus Affects Single-Asset/Single-Borrower Hotel Loans in the U.S.,” which analyzes the potential impact of the coronavirus on more than $34 billion of U.S. SASB deals backed by hotels in the industry. In that commentary, DBRS Morningstar described the reasons for its negative outlook on U.S. SASB deals backed by hotels, including travel restrictions for certain countries, widespread cancellation of conventions and meetings, personal travel disruptions, and related circumstances. Because of the nature of advance booking cancellations, daily bookings, and reliance on tourism, it is uncertain if operators are prepared to manage these disruptions.

Given that the updated mandates in the U.S. for social distancing and shelter in place continue to evolve since DBRS Morningstar published its commentary on March 11, 2020, DBRS Morningstar now believes that the net cash flow (NCF) decline may be more substantial with a prolonged recovery as convention and event cancellations extend into the second quarter of this year and potentially into the third quarter. DBRS Morningstar further believes that, until such mandates are lifted, negative pressure on the NCFs for U.S. SASB hotel loans will continue while the exact impact on NCFs and long-term values is unclear.

DBRS Morningstar’s NA CMBS analytical team’s review is expected to include each property’s position within its market, its relative leverage points, updated bookings, and performance metrics, when available, from the servicers. In addition, DBRS Morningstar is reviewing historical data points that may be able to provide guidance to set forth additional refined stress scenarios and the relative impact that particular scenarios may have on outstanding transactions.

DBRS MORNINGSTAR PROVIDES ADDITIONAL UPDATE ON ITS CURRENTLY RATED NA SASB TRANSACTIONS
On March 1, 2020, DBRS Morningstar finalized the Request for Comment on its “North American Single-Asset/Single-Borrower Ratings Methodology” (NA SASB Methodology) and, as of the date of this press release, DBRS Morningstar is in the process of applying the finalized NA SASB Methodology to outstanding DBRS Morningstar-rated NA SASB transactions. Following today’s rating action, the DBRS Morningstar ratings on NA SASB transactions that were previously placed Under Review with Developing Implications will remain Under Review with Developing Implications.

<a href="https://www.dbrsmorningstar.com/research/352726/" target="_blank">“DBRS Morningstar Requests Comments on North American Single-Asset/Single-Borrower Ratings Methodology”</a>

DBRS Morningstar will apply the finalized NA SASB Methodology to the relevant outstanding DBRS Morningstar ratings, reflecting its qualitative assumptions, capitalization rates, and the latest Loan-to-Value (LTV) Sizing Benchmarks as though there are no disruptions caused by the coronavirus.

At the same time, DBRS Morningstar may also apply the appropriate additional refined stress scenarios referenced above to reflect its then-current view on the disruptions that the coronavirus is expected to cause for the relevant U.S. SASB transactions backed by lodging properties.

DBRS Morningstar notes that, depending on when DBRS Morningstar applies the finalized NA SASB Methodology to its NA SASB transactions backed by lodging properties, every scenario reflecting the impact of the coronavirus may not be fully known; therefore, following its application of the NA SASB Methodology, the relevant DBRS Morningstar ratings may remain Under Review with Negative Implications.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at https://www.dbrsmorningstar.com/research/357792.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

MORNINGSTAR CREDIT RATINGS PLACES ITS CURRENTLY RATED NA SASB TRANSACTIONS UNDER REVIEW NEGATIVE
In conjunction with this press release, Morningstar Credit Ratings, LLC (MCR), DBRS Morningstar’s credit rating affiliate, also placed the ratings on its outstanding U.S. SASB transactions secured by hospitality (lodging) properties Under Review Negative. MCR also placed the relevant MCR NA SASB ratings Under Review Negative as a result of the negative impact of the coronavirus on hospitality (lodging) properties.

For more information on MCR’s related announcement, please see:
<a href="https://ratingagency.morningstar.com/PDD.aspx?i=si8LRcC0RXo%3d" target="_blank">“Morningstar Credit Ratings Places U.S. Single-Asset/Single Borrower (SASB) Transactions Backed by Hospitality Properties Under Review Negative”</a>

DBRS MORNINGSTAR AND MCR PROVIDE ADDITIONAL UPDATE ON U.S. SASB TRANSACTIONS MCR CURRENTLY RATES
Following today’s announcement, all outstanding MCR ratings on U.S. SASB transactions that were previously placed Under Review—Analytical Integration Review will remain Under Review—Analytical Integration Review.

<a href="https://ratingagency.morningstar.com/PublicDocDisplay.aspx?i=EJVXeO3Gj90%3d&m=&s=LviRtUKXqs8kml5dHt7FTeE2SZmY0Fvqd4iX49Mk%2f9UapyiFTEO6TA%3d%3d" target="_blank">“Morningstar Places Ratings in NA Single-Asset/Single-Borrower Asset Class Under Review”</a>

Further to the finalization of the DBRS Morningstar NA SASB Methodology on March 1, 2020, DBRS Morningstar will also continue applying the NA SASB Methodology to assign new DBRS Morningstar ratings to outstanding MCR U.S. SASB transactions that are not currently rated by DBRS Morningstar. DBRS Morningstar will apply the finalized NA SASB Methodology to the relevant outstanding MCR ratings, reflecting its qualitative assumptions, capitalization rates, and the latest LTV Sizing Benchmarks as though there are no disruptions caused by the coronavirus.

At the same time, DBRS Morningstar may also apply the appropriate additional refined stress scenarios referenced above to reflect its then-current view on the disruptions that the coronavirus is expected to cause for the relevant U.S. SASB transactions backed by hospitality (lodging) properties.

DBRS Morningstar notes that, depending on when DBRS Morningstar applies the finalized NA SASB Methodology to MCR’s outstanding U.S. SASB transactions backed by lodging properties, every scenario reflecting the impact of the coronavirus may not be fully known; therefore, following its application of the NA SASB Methodology, DBRS Morningstar may place the relevant DBRS Morningstar ratings Under Review with Negative Implications.

Subsequent to the assignment of the DBRS Morningstar ratings, the outstanding MCR ratings will be withdrawn at a future date. In accordance with MCR’s engagement letters covering these U.S. SASB transactions, upon withdrawal of these outstanding MCR ratings for U.S. SASB transactions, the relevant DBRS Morningstar ratings will become the successor ratings to the withdrawn MCR ratings.

A list of impacted NA SASB transactions include:

CURRENT DBRS MORNINGSTAR-RATED NA SASB TRANSACTIONS
-- Ashford Hospitality Trust 2018-KEYS
-- Atrium Hotel Portfolio Trust 2018-ATRM
-- BBCMS 2017-DELC Mortgage Trust
-- BBCMS Trust 2018-RRI
-- BHMS 2018-ATLS
-- Braemar Hotels & Resorts Trust 2018-PRME
-- BX Trust 2017-APPL
-- BX Trust 2017-CQHP
-- BX Trust 2018-GW
-- CFCRE 2018-TAN
-- CHT 2017-COSMO Mortgage Trust
-- CSMC Trust 2017-CHOP
-- Fontainebleau Miami Beach Trust 2019-FBLU
-- GS Mortgage Securities Corporation Trust 2017-SLP
-- GS Mortgage Securities Corporation Trust 2017-STAY
-- GS Mortgage Securities Corporation Trust 2018-HULA
-- InTown Hotel Portfolio Trust 2018-STAY
-- J.P. Morgan Chase Commercial Mortgage Securities Trust 2017-FL11
-- J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-ASH8
-- Margaritaville Beach Resort Trust 2019-MARG

CURRENT MCR-RATED NA SASB TRANSACTIONS
-- 20 Times Square Trust 2018-20TS
-- HHT 2019-MAUI
-- AHT 2018-ASHF
-- BAMLL 2017-SCH
-- BBCMS 2018-BXH
-- BBCMS 2018-CBM
-- CCRESG 2016-HEAT
-- CGCMT 2015-SHP2
-- CLNY Trust 2019-IKPR
-- COMM 2020-CBM
-- CSAIL 2017-CX10
-- GS Mortgage Securities Corporation Trust 2019-BOCA
-- GSMS 2018-LUAU
-- Hilton USA 2016-HHV
-- Hilton USA Trust 2016-SFP
-- HMH Trust 2017-NSS
-- JPMCC 2016-WIKI
-- JPMCC 2017-FL10
-- MBRT 2019-MBR
-- MSC 2017-ASHF
-- MSC 2018-SUN
-- MSC 2019-PLND
-- NCMS 2018-RIVA
-- NCMS 2018-SOX
-- UBSCM 2018-NYCH Mortgage Trust

For analytical inquiries regarding this press release, please contact Erin Stafford, Managing Director, North American CMBS.

DBRS Morningstar
Erin Stafford
[email protected]
+1 312 332-3291

For rating engagement inquiries regarding NA CMBS transactions, please contact Sean O’Connor, Managing Director, Head of Global Business Development.

DBRS Morningstar
Sean O’Connor
[email protected]
+1 212 806-3252

For more information on the transactions rated by DBRS Morningstar, please visit https://www.dbrsmorningstar.com/ or contact DBRS Morningstar at [email protected]. For transactions rated by MCR, please visit http://www.morningstarcreditratings.com or contact [email protected].

DBRS Morningstar
Stephen Bernard
[email protected]
+1 212 806-3240