Fitch Affirms SCG 2013-CWP Hotel Issuer Inc.

CHICAGO--()--Fitch Ratings has affirmed the following classes of SCG 2013-CWP Hotel Issuer Inc., commercial pass-through certificates, series 2013-CWP (all currency amounts are Canadian dollars unless noted otherwise):

--$30.2 million class A-1 at 'AAAsf'; Outlook Stable;

--$188 million class A-2 at 'AAAsf'; Outlook Stable;

--$25 million class B at 'AAsf'; Outlook Stable;

--$40 million class C at 'Asf'; Outlook Stable;

--$65 million class D at 'BBBsf'; Outlook Stable;

--$40 million class E at 'BBB-sf'; Outlook Stable.

The interest-only class X is not rated by Fitch.

KEY RATING DRIVERS

The trailing 12-month (TTM) performance of the hotel portfolio has increased since Fitch's last rating action in 2014. As of April 2015, the servicer-reported portfolio TTM net cash flow (NCF) was $60.7 million versus the reported TTM NCF of $58.6 million at issuance. Fitch's stressed debt service coverage ratio (DSCR) and loan to value (LTV) for the trust component of the debt are 1.52x and 69%, respectively, compared with 1.41x and 73.9%, at issuance.

There is an $80 million interest-only mezzanine loan subordinate to and co-terminus with the trust mortgage. The transaction has a standard sequential-pay structure.

The portfolio consists of five, Westin-flagged hotels that are well-located in the downtown core of five of Canada's six largest cities. Four of the five assets achieved revenue per available room (RevPAR) growth year-over-year (as of end of April 2015) and occupancy remains strong at all five hotels. Between 2005 and 2012, the properties underwent approximately $181 million ($61,887 per key) in capital expenditures. Therefore, there were no property improvement plans (PIPs) required upon the loan sponsor, Starwood Capital Group's, purchase of the portfolio. Also, prior to issuance, the sponsor signed a 30-year management agreement with Starwood Hotels.

The ratings reflect strong historical Canadian commercial real estate loan performance, including a low delinquency rate and low historical losses. In addition, the legal framework generally favors lenders' rights.

RATING SENSITIVITIES

The Rating Outlook for all classes remains Stable. Hotels have historically exhibited volatile performance compared with other property types; however, as the transaction continues to amortize coupled with the increase in portfolio cash flow and no further economic headwinds from the decline in oil prices, upgrades may be warranted. Conversely, no downward rating actions are expected unless there is significant deterioration of property occupancy and cash flow.

DUE DILIGENCE USAGE

No third-party due diligence was provided or reviewed in relation to this rating action.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 20 Mar 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=862818

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Related Research

SCG 2013-CWP Hotel Issuer Inc. -- Appendix
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732564

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=989748

Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=989748

Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Jeffrey Diliberto, +1-312-368-3268
Director
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Committee Chairperson, +1-212-908-0785
Mary MacNeill
Managing Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
New York
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Jeffrey Diliberto, +1-312-368-3268
Director
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Committee Chairperson, +1-212-908-0785
Mary MacNeill
Managing Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
New York
sandro.scenga@fitchratings.com