Fitch Affirms HILT 2014-ORL Mortgage Trust Series 2014-ORL
OREANDA-NEWS. Fitch Ratings has affirmed five classes of HILT 2014-ORL Mortgage Trust commercial mortgage pass-through certificates series 2014-ORL. A full list of rating actions follows at the end of this release.
The certificates represent the beneficial interest in a trust that holds a single two-year floating-rate interest-only mortgage loan, subject to five one-year extension options, in the amount of $345 million secured by the fee interest in Hilton Orlando, a 1,417-room full service hotel located at 6001 Destination Parkway in Orlando, FL.
KEY RATING DRIVERS
The affirmations reflect the stable to improving performance of the collateral since issuance. The collateral has demonstrated an upward trend in cash flow since it was constructed in 2009, which parallels the U. S. lodging industry's performance over the same time period. The transaction is secured by a single hotel property and therefore more susceptible to single event risk related to the market. Hotel performance is considered to be more volatile due to its operating nature. Fitch will continue to monitor the subject property's performance to ensure that revenues and incomes considered at the time of Fitch's initial ratings are sustainable over the loan term.
The Hilton Orlando was constructed in 2009 and has 232,000 sf of meeting and event facilities, a full service salon and spa, a large fitness center and six food and beverage venues. Amenities include a large family pool, a 10,000-sf deck, a quiet pool with whirlpool, lazy river, 12 cabanas, water slide, nine-hole executive putting course, jogging track, two fire pits, as well as volleyball, basketball and tennis courts. The hotel is well located in Orlando's major entertainment district, within five-15 minutes of SeaWorld Orlando, Universal Orlando Resort and Walt Disney World Resort.
The property's performance has continued to improve since issuance. Occupancy, ADR, and RevPAR as of trailing 12 month (TTM) January 2016 were reported at 72.9%, $179.12, and $130.59, respectively, compared to TTM May 2014 at 70.6% occupancy, $167.36 ADR, and $118.20 RevPAR. The TTM March 2016 net cash flow (NCF) was approximately 36% over year end (YE) 2013 NCF, primarily due to a 32% increase in revenue. The improved revenue was driven by a 59% increase in 'food & beverage' income that is directly attributed to higher revenue generated by The Promenade, a 50,000 square foot outdoor event space at the hotel which opened in November 2013. Room revenue also saw a 14% increase over the same time period. Fitch's stressed DSCR and LTV for the entire trust at issuance was 1.07x and 98.3%, respectively. The Fitch stressed DSCR and LTV at issuance through class D, the lowest tranche rated by Fitch in this transaction, was 1.56x and 67.3%, respectively.
RATING SENSITIVITIES
Fitch views the overall hotel industry as operating at peak levels for the cycle. Given this view, Fitch conducted an additional stressed analysis taking into account the impact of potential RevPAR declines on the current ratings. The Rating Outlooks for class A, class D, and class X-EXT remain Stable due to sufficient credit enhancement. The Positive Outlooks for class B and class C indicate potential for future upgrades should property performance continue to improve and market fundamentals remain stable. Fitch does not foresee negative rating migration unless a material economic or asset level event changes the transaction's portfolio-level metrics. Additional information on rating sensitivity is available in the report 'HILT 2014-ORL Mortgage Trust, Series 2014-ORL (U. S. CMBS)' (July 8, 2014), available at www. fitchratings. com.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed the following ratings and revised Outlooks as indicated:
--$116,508,000 class A at 'AAAsf'; Outlook Stable;
--$13,196,250 * class X-EXT at 'AAAsf'; Outlook Stable;
--$43,885,000 class B, at 'AA-sf'; Outlook to Positive from Stable;
--$32,623,000 class C at 'A-sf'; Outlook to Positive from Stable;
--$43,108,000 class D at 'BBB-sf'; Outlook Stable
* Notional amount and interest-only.
Fitch does not rate the $67,963,000 class E certificates or the $40,913,000 class F certificates. The interest only classes X-FP and X-CP paid in full.
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