NEW YORK--(BUSINESS WIRE)--Fitch Ratings has placed four classes of Morgan Stanley Capital I Trust MSCI 2015-XLF2 commercial mortgage pass-through certificates, series 2015-XLF2 on Rating Watch Negative and has affirmed the remaining four classes. A full list of rating actions follows at the end of this release.
The transaction certificates represent beneficial ownership in the trust, the primary assets of which are two floating-rate loans secured by 10 commercial properties. The Starwood National Mall Portfolio loan has a trust balance of $161 million and the Ashford Full Service II Portfolio loan has a trust balance of $144 million. Each loan has been split between loan specific senior and junior notes. The loans were originated by Morgan Stanley Bank, N.A.
KEY RATING DRIVERS
The Rating Watch Negative placement of the SNM classes is due to the most recent servicer reported year-end (YE) 2015 net operating income which indicates a 17% decline compared to issuance. Fitch has requested further clarification and/or additional information regarding certain line items reported in the servicer-reported statement (percentage rent, expense reimbursement, and repairs and maintenance expense) and is awaiting a response. Fitch expects to resolve the rating watch within the next three months.
The SNM classes represent the loan secured by a portfolio of three regional malls totaling 3.3 million (1.6 million collateral) located in Plano, TX, Dearborn, MI and Richmond, VA. The portfolio includes The Shops at Willow Bend, a 1.24 million square foot (sf) mall located in Plano, TX; Fairlane Town Center, a 1.38 million sf mall located in Dearborn, MI; and Stony Point Fashion Park, a 675,949 sf open air center in Richmond, VA.
The affirmations of the AFS classes reflect the stable performance of the Ashford Hotel Portfolio II which remains in-line with Fitch's expectations at issuance.
The AFS classes represent the loan secured by a portfolio of seven cross-collateralized and cross-defaulted full-service hotels totaling 1,511 keys. The properties are flagged with Hilton, Hyatt and Intercontinental franchisors. The largest asset is the Marriott Beverly Hills and was reflagged from a Crowne Plaza to a Marriott International at issuance.
Stable Occupancy, ADR, RevPAR Performance: Per the trailing- twelve-month (TTM) August 2016 Smith Travel Research (STR) report for each property, occupancy, ADR and RevPAR compared to their competitive set were as follows:
Marriott Beverly Hills: 84%, $252, $211 compared to 85%, $222, $190;
Hyatt Coral Gables: 83%, $196, $162 compared to 72%, $198, $144;
Hilton Fort Worth: 78%, $162, $126 compared to 71%, $174, $123;
One Ocean Resort Hotel & Spa: 71%, $205, $144 compared to 64%, $197, $127;
Embassy Suites East Syracuse: 73%, $122, $89 compared to 71%, $118, $84;
Hilton Santa Fe: 83%, $151, $125 compared to 70%, $152, $106;
Embassy Suites Dulles Airport: 80%, $151, $121 compared to 77%, $129, $99.
Concentrated Transaction: The transaction includes just two loans, representing 52.8% and 47.2% of the transaction, respectively. The loans are not pooled, and each loan is supported only by its respective collateral.
Experienced Sponsorship/Sponsor Investment: The respective sponsors of the loans are affiliates of Ashford and Starwood. Ashford is a publicly traded real estate investment trust (REIT) that focuses on investing in the hospitality industry. Starwood was started in 1991 and has approximately $36 billion in assets under management. Starwood owns and operates 31 retail properties totaling 27 million square feet.
All Loans Have Additional Debt: Both loans have additional debt in the form of B-notes as well as mezzanine debt for the Ashford loan, outside of the trust. The positions are fully subordinated and subject to standard intercreditor agreements.
The Rating Watch Negative Placement on classes SNMA, SNMB, SNMC, and SNMD could result in a potential one category downgrade if upon receipt of the requested updates additional information on the outstanding line items in question confirm a material decline in the portfolio's net operating income. The Rating Outlook for classes AFSA, AFSB, AFSC, and AFSD remains Stable. Fitch does not foresee negative rating migration unless a material economic or asset level event changes the transaction's portfolio-level metrics.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third party due diligence was provided or reviewed in relation to this rating
Fitch has placed the following classes on Rating Watch Negative:
--$103,000,000ab class SNMA 'AAAsf';
--$21,000,000ab class SNMB 'AA-sf';
--$15,000,000ab class SNMC 'A-sf';
--$22,000,000ab class SNMD 'BBB-sf'.
Fitch has affirmed the following classes:
--$85,000,000ac class AFSA 'AAAsf'; Outlook Stable;
--$21,000,000ac class AFSB 'AA-sf'; Outlook Stable;
--$15,000,000ac class AFSC 'A-sf'; Outlook Stable;
--$23,000,000ac class AFSD 'BBB-sf'; Outlook Stable.
a -- Privately placed pursuant to Rule 144A.
b -- The SNM certificates represent the beneficial interests in the Starwood National Mall Portfolio non-pooled trust assets.
c -- The AFS certificates represent the beneficial interests in the Ashford Full Service II portfolio non-pooled trust assets.
The classes AFX1 and AFX2 certificates were not part of the final structure of this transaction and had been previously withdrawn.
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 18 Aug 2016)
Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
Morgan Stanley Capital I Trust 2015-XLF2 -- Appendix
Dodd-Frank Rating Information Disclosure Form
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