Fitch Assigns Final Ratings to Citigroup Commercial Mortgage Trust 2015-SHP2 P-T Certificates
--$89,545,000a class A notes 'AAAsf'; Outlook Stable;
--$46,545,000ab class X-CP notes 'AAAsf'; Outlook Stable;
--$46,545,000ab class X-NCP notes 'AAAsf'; Outlook Stable;
--$18,455,000a class B notes 'AA-sf'; Outlook Stable;
--$13,000,000a class C notes 'A-sf'; Outlook Stable;
--$21,000,000a class D notes 'BBB-sf'; Outlook Stable.
The following classes are not rated:
--$38,000,000a class E;
--$35,000,000a class F.
a Privately placed pursuant to Rule 144A.
b Notional amount and interest-only.
The ratings are based on information provided by the issuer as of July 6, 2015.
The certificates represent the beneficial ownership in the trust, the primary asset of which is one loan having an aggregate principal balance of $215 million as of the cut-off date. The trust is primarily secured by the first priority mortgages on each borrower's fee simple interest and the operating lessee's leasehold interest in 22 hotel properties totalling 2,673 keys.
The sponsors for the loan are Starwood Capital Group Global II, L.P., an affiliate of Starwood Capital Group, and Schulte Hospitality Group. The loan was originated by Citigroup Commercial Global Markets Realty Corp.
KEY RATING DRIVERS
Market Positioning: The portfolio is considered to have above-average performance within the respective markets with a trailing 12 months (TTM) April 2015 occupancy, ADR, and RevPAR penetration levels of 109.3%, 107.3% and 117.7%, respectively, by allocated loan amount (ALA).
Property Renovations: Since 2008, the properties have received approximately $16,688 per key in capital improvements. A PIP reserve of $30.9 million ($11,546 per key) was reserved at closing for improvements to be made across the portfolio over the next 24 months, which will be used primarily for room and common area renovations and upgrades.
Diverse Portfolio: The portfolio is diverse in terms of geography and franchises with hotels located in 10 states across 15 markets and representing 10 different franchise brands, including Hilton Garden Inn (21.7% by ALA), Embassy Suites (14.5% by ALA) and Home2 Suites (11.8% by ALA).
High Trust Leverage: Fitch's stressed debt service coverage ratio (DSCR) and loan to value (LTV) for the trust component of the debt are 1.03x and 104.3%, respectively.
RATING SENSITIVITIES
Fitch found that the property could withstand a 72.9% decline in value and an approximate 60.4% decline in Fitch's net cash flow prior to experiencing $1 of loss to the 'AAAsf' rated classes.
Fitch performed several stress scenarios in which the Fitch net cash flow (NCF) was stressed. Fitch determined that a 72.8% reduction in Fitch's NCF would cause the notes to break even at
a 1.0x DSCR, based on the actual debt service.
Fitch evaluated the sensitivity of the ratings for class A and found that an 8.1% decline in Fitch NCF would result in a one-category downgrade, while a 36.9% decline would result in a downgrade to below investment grade.
The Rating Sensitivity section in the presale report includes a detailed explanation of additional stresses and sensitivities. Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report. The presale report is available to all investors on Fitch's web site 'www.fitchratings.com'.
DUE DILIGENCE USAGE
Fitch was provided with third-party due diligence information from KPMG LLP. The third-party due diligence information was provided on Form ABS Due Diligence Form-15E and focused on a comparison and re-computation of certain characteristics with respect to the mortgage loan and related mortgaged properties in the data file. Fitch considered this information in its analysis and the findings did not have an impact on our analysis.
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