Kroll Bond Rating Agency Assigns Preliminary Ratings to CSMC 2017-HD

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to nine classes of CSMC 2017-HD, a $218.6 million CMBS single borrower transaction (see ratings list below).

The collateral for the securitization consists of a $218.6 million single, non-recourse, first lien, floating-rate mortgage loan that is secured by the borrower’s fee simple and leasehold interests in the 878-key Hudson Hotel located in New York, New York and the borrower’s fee simple interest in the 194-key Delano Hotel located in Miami Beach, Florida. For the TTM 1/2017 period, the portfolio’s occupancy was 86.9% with an average daily rate (ADR) of $236.51, resulting in revenue per available room (RevPAR) of $205.63.

The sponsor is SBE Entertainment Group, a global hotel, residential, food and entertainment company founded in 2002 by Sam Nazarian. After its acquisition of Morgans Hotel Group in December 2016, SBE has a current portfolio of 22 boutique hotel properties with more than 7,000 keys in seven markets as well as more than 90 entertainment and food & beverage offerings. The sponsor is a joint venture between Sam Nazarian (63.75% ownership), Yucaipa Hospitality Investments, LLC (25.0% ownership) and Cain Hoy Enterprises LP (11.25% ownership).

KBRA’s analysis of the transaction included a detailed evaluation of the property’s cash flow using our CMBS Property Evaluation Methodology, and the application of our CMBS Single Borrower and Large Loan Rating Methodology. The results of our analysis yielded a KBRA net cash flow (KNCF) for the portfolio of $21.6 million. To value the property, we applied an implied capitalization rate of 7.77% to arrive at a KBRA value of $277.6 million, which includes an adjustment for a floor value for The Hudson Hotel. The resulting KBRA Loan to Value (KLTV) is 78.7%. In our analysis of the transaction, we also reviewed and considered third party engineering, environmental, and appraisal reports; management agreements; STR reports; the results of our site inspection of the properties; and legal documentation review.

For further details on KBRA’s analysis, please see our Pre-Sale Report, CSMC 2017-HD, which was published today at www.kbra.com.

The preliminary ratings are based on information known to KBRA at the time of this publication. Information received subsequent to this release could result in the assignment of ratings that differ from the preliminary ratings.

Preliminary Ratings Assigned: CSMC 2017-HD

       
Class     Expected Rating     Balance (US$)
A     AAA (sf)     $ 69,900,000
X-CP     AAA (sf)     $ 69,900,000 (1)
X-EXT     AAA (sf)     $ 69,900,000 (1)
B     AAA (sf)     $ 26,300,000
C     AA+ (sf)     $ 19,600,000
D     A (sf)     $ 25,900,000
E     BB+ (sf)     $ 40,800,000
F     BB- (sf)     $ 24,600,000
HRR(2)     B+ (sf)     $ 11,500,000

(1) Notional balance

(2) To satisfy the US risk retention rules, a third party purchaser will purchase and retain an “eligible horizontal residual interest” consisting of the Class HRR certificates, representing 5.0% of the fair value of all interests issued by the issuer on the closing date, determined in accordance with GAAP.

Representations & Warranties Disclosure

All Nationally Recognized Statistical Rating Organizations are required, pursuant to SEC Rule 17g-7, to provide a description of a transaction’s representations, warranties, and enforcement mechanisms that are available to investors when issuing credit ratings. KBRA’s disclosure for this transaction can be found in the report entitled CSMC 2017-HD Representations & Warranties Disclosure.

Related Publications: (available at www.kbra.com)

CMBS Pre-Sale Report: CSMC 2017-HD

CMBS Property Evaluation Methodology

CMBS Single Borrower and Large Loan Rating Methodology

Methodology for Rating Interest-Only Certificates in CMBS Transactions

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About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

Contacts

Kroll Bond Rating Agency
Analytical Contacts:
Laura Wolinsky, Director
(646) 731-2379
lwolinsky@kbra.com
or
Anna Hertzman, Managing Director
(646) 731-2367
ahertzman@kbra.com
or
Dayna Carley, Senior Director
(646) 731-2391
dcarley@kbra.com
or
Stephanie Ruys de Perez, Senior Analyst
(646) 731-2466
sruysdeperez@kbra.com

Contacts

Kroll Bond Rating Agency
Analytical Contacts:
Laura Wolinsky, Director
(646) 731-2379
lwolinsky@kbra.com
or
Anna Hertzman, Managing Director
(646) 731-2367
ahertzman@kbra.com
or
Dayna Carley, Senior Director
(646) 731-2391
dcarley@kbra.com
or
Stephanie Ruys de Perez, Senior Analyst
(646) 731-2466
sruysdeperez@kbra.com