Morningstar DBRS Confirms Credit Ratings on All Classes of Morgan Stanley Capital I Trust 2017-ASHF

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on the Commercial Mortgage Pass-Through Certificates, Series 2017-ASHF issued by Morgan Stanley Capital I Trust 2017-ASHF as follows:

-- Class A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class XEXT at A (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the underlying hotel portfolio since Morningstar DBRS' previous credit rating action in May 2024. This is evidenced by the continued stable portfolio occupancy rates, cash flows, and revenue per available room (RevPAR) figures as reported in the most recent STR report provided to Morningstar DBRS. The loan transferred to special servicing in August 2024 ahead of its extended November 2024 maturity date due to imminent maturity default. Although a workout strategy has yet to be finalized, a loan modification extending the maturity date does seem likely and would likely be subject to an equity injection by the sponsor and the purchase of an interest rate cap, based on previous extensions granted by the special servicer. The Morningstar DBRS loan-to-value ratio (LTV) is relatively moderate at 74.8% for the Morningstar DBRS-credit-rated portion of the whole loan debt. In the event talks between the sponsor and the servicer break down completely and a liquidation of the portfolio were to be ultimately undertaken by the trust, the Morningstar DBRS-credit-rated classes in the transaction would appear well insulated from loss with a cushion of approximately $112 million in the non-Morningstar DBRS-credit-rated Classes F, G, and HRR supporting the credit rating confirmations and Stable trends with this review.

The subject transaction comprises an interest-only (IO), floating-rate loan, collateralized by a portfolio of 17 hotel properties with multiple formats represented, including all-suite, full-service, limited-service, and extended-stay hotels. The portfolio combines 3,128 rooms across seven states. As of the April 2025 remittance, the trust has a balance of $409.8 million representing a collateral reduction of 4.0% since issuance. There have been no hotel property releases to date, however, the previous release of a parking parcel at a property in St. Petersburg, Florida, contributed to the marginal principal repayment since issuance.

The loan benefits from sponsorship by Ashford Hospitality Trust, Inc. (Ashford), an experienced hotel investment company and publicly traded real estate investment trust. The hotels are managed by two separate companies: Marriott manages five of the hotels while Remington Lodging and Hospitality, LLC manages the remaining 12. All hotels in the portfolio operate under nationally recognized flags, including Hilton Worldwide Holdings Inc. and Marriott International, Inc. (Marriott).

According to the February 2025 STR reports, the portfolio reported weighted-average (WA) occupancy rate, average daily rate (ADR) and RevPAR figures of 70.4%, $166, and $117, respectively, for the trailing 12-month period (T-12) ended February 29, 2025. These figures compare with the figures of 71.7%, $165, and $119, respectively, for the T-12 ended February 28, 2024. Current performance figures from February 2025 remain generally in line with recent historical figures but have not restabilized at pre-pandemic levels. According to the most recent financials, the net cash flow (NCF) for YE2024 was reported at $36.7 million (debt service coverage ratio (DSCR) of 1.03 times (x)), compared with $37.9 million for YE2023 (DSCR of 1.10x) and the Morningstar DBRS NCF of $37.1 million derived with the May 2024 review.

Morningstar DBRS maintained its analysis from last review, which includes an updated Morningstar DBRS value of $398.3 million, based on the Morningstar DBRS NCF of $37.1 million, derived from a 2.0% haircut to the YE2023 NCF, and a Morningstar DBRS cap rate of 9.31%. This value is a noteworthy decline from the 2020 Morningstar DBRS value of $440.0 million derived when the credit ratings were assigned; the value decline has been partially offset by principal paydown of just over $17.0 million associated with a previous maturity extension granted by the special servicer. Although the in-place NCF figure of $36.7 million is slightly below the Morningstar DBRS NCF figure, revenues in 2024 grew above the 2023 figures, with the year-over-year NCF decline the result of increased expenses. Morningstar DBRS will monitor the in-place performance closely and will adjust the Morningstar DBRS NCF figure if the in-place NCF continues to slide with the 2025 reporting. The Morningstar DBRS Value of $398.3 million results in an LTV of 74.8% on the $298.0 million Morningstar DBRS-credit-rated portion of the capital stack and an all-in LTV of 102.9% on the $409.8 million remaining balance of the whole loan. No qualitative adjustments were made to the LTV Sizing Benchmarks.

As a test of the durability of the credit ratings, given the uncertainty associated with the transfer to special servicing and potential loan modification, Morningstar DBRS conducted a hypothetical liquidation scenario based on the updated Morningstar DBRS Value derived in May 2024. The results of the analysis suggest the hypothetical liquidation losses would be contained to the non-Morningstar DBRS-credit-rated Class G certificate. Should a liquidation ultimately occur, the credit support provided in Classes F, G, and HRR would be sufficient cushion before losses hit Class E, the lowest Morningstar DBRS-credit-rated class in the capital stack, supporting the credit rating confirmations and Stable trends with this review.

The Morningstar DBRS credit rating assigned to Class C is lower than the result suggested by the LTV Sizing Benchmarks. The variance is warranted given the uncertain loan-level event risk. Although recent performance remains in line with Morningstar DBRS' expectations at the last review, the subject loan is now past due its fully extended maturity date of November 2024 and is currently in special servicing awaiting a finalized workout strategy.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS   
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024): https://dbrs.morningstar.com/research/437781.

Class XEXT 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 credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

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

The principal methodology is North American CMBS Surveillance Methodology (February 28, 2025): https://dbrs.morningstar.com/research/448963

Other methodologies referenced in this transaction are listed at the end of this press release.

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@morningstar.com.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings]

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

DBRS Limited
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Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- North American Single-Asset/Single-Borrower Ratings Methodology (February 28, 2025), https://dbrs.morningstar.com/research/448962

-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702

-- Legal Criteria for U.S. Structured Finance (December 3, 2024), https://dbrs.morningstar.com/research/444064

-- Interest Rate Stresses for U.S. Structured Finance Transactions (March 27, 2025), https://dbrs.morningstar.com/research/450750

-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at https://dbrs.morningstar.com/research/417279 (July 17, 2023).

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.