DBRS Morningstar Changes Trends on All Classes of GS Mortgage Securities Corporation Trust 2017-STAY to Stable from Negative

DBRS Limited (DBRS Morningstar) confirmed the ratings on the following classes of the Commercial Mortgage Pass-Through Certificates, Series 2017-STAY issued by GS Mortgage Securities Corporation Trust 2017-STAY:

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

DBRS Morningstar also changed the trends on all classes to Stable from Negative following the better-than-expected cash flow figures for the portfolio in 2020 and through Q2 2021.

Despite the Coronavirus Disease (COVID-19) pandemic, the portfolio reported a healthy YE2020 net cash flow of $29.1 million, representing a 6.1% decline from the YE2019 net cash flow of $31.0 million. The portfolio’s trailing 12 months period ended June 30, 2021, net cash flow was reported at $31.5 million with an occupancy rate of 86.0%, consistent with pre-pandemic levels and well above the DBRS Morningstar net cash flow derived at issuance of $25.0 million.

All of the properties are well established within their respective markets and the sponsor has invested in the collateral since acquisition. Since 2013, the sponsor has spent approximately $24.1 million ($4,639 per key) on capital improvements across the portfolio. There are no franchised locations, so a property improvement plan is not required for any of the hotels. Because the average age of the portfolio assets is more than 20 years and because the rates are generally lower that at traditional hotels, the borrower is required to deposit 5.0% of the portfolio’s operating income into the furniture, fixtures, and equipment reserve on a monthly basis.

The loan is secured by the fee interest in a portfolio of 40 extended-stay hotels totalling 5,195 keys—an average of 132 keys per location—across 14 states. Although somewhat concentrated in the southeast region, the portfolio is geographically diverse and relatively granular as no single hotel represents more than 4.7% of the allocated loan balance. All hotels operate under the InTown Suites flag, which is owned by the loan sponsor, Starwood Capital Group Global L.P. The sponsor has substantial experience in the hotel sector and acquired the collateral in 2013 from Kimco Realty Corporation as part of the acquisition of the InTown Suites platform for $735.0 million.

The $200.0 million trust loan is a floating-rate, interest-only (IO) mortgage with an initial term of three years and two one-year extension options. The borrower exercised its second of two one-year extension options with a new loan maturity date of July 2022.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

The DBRS Morningstar rating for Class E had variances that were generally higher than those results implied by loan-to-value sizing benchmarks, which were based on a baseline valuation scenario. Given the low in-place cash flows and uncertain timeline for the collateral hotels’ stabilization, the variances were warranted.

Class X-NCP is an IO certificate that references 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 Morningstar.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is North American CMBS Surveillance Methodology (March 26, 2021), which can be found on dbrsmorningstar.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 Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.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 DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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 [email protected].

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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