CHICAGO--(BUSINESS WIRE)--Fitch Ratings has issued a presale report on J.P. Morgan Chase Commercial Mortgage Securities Trust 2016-WSP commercial mortgage pass-through certificates series 2016-WSP.
Fitch expects to rate the transaction and assign Rating Outlooks as follows:
--$86,300,000 class A 'AAAsf'; Outlook Stable;
--$20,900,000 class B 'AA-sf'; Outlook Stable;
--$19,600,000 class C 'A-sf'; Outlook Stable;
--$23,200,000 class D 'BBB-sf'; Outlook Stable;
--$150,000,000a class X-CP 'BBB-sf'; Outlook Stable;
--$150,000,000a class X-NCP 'BBB-sf'; Outlook Stable;
--$36,900,000 class E 'BB-sf'; Outlook Stable;
--$48,100,000 class F 'B-sf'; Outlook Stable.
(a) Notional amount and interest-only.
The expected ratings are based on information provided by the issuer as of Aug. 31, 2016.
The certificates represent the beneficial interest in a trust that holds a two-year, floating-rate, interest-only $235 million mortgage loan secured by the fee interests in 63 hotel properties with a total of 7,557 rooms located in 20 states. The sponsor of the loan is WoodSpring Hotels Holdings. The loan was originated by JPMorgan Chase Bank, National Association (rated 'A+'/'F1'/Stable Outlook).
KEY RATING DRIVERS
High Leverage on Full Debt Stack: The total debt package includes mezzanine financing in the amount of $40.0 million that is not included in the trust. Fitch Ratings' stressed debt service coverage ratio (DSCR) and loan to value (LTV) for the full debt stack are 0.96x and 112.1%, respectively. Fitch's DSCR and LTV for the trust component of the debt are 1.13x and 95.8%, respectively.
Granular and Diverse Portfolio: The portfolio comprises 63 extended-stay hotels, three are currently operated as WoodSpring Suites and the remaining 60 as Value Place (54 of which are expected to be rebranded to WoodSpring Suites by 2017), across 20 states. No single asset accounts for more than 3.3% of the TTM July 2016 net cash flow, or 1.7% of the total keys.
Upward Trending Performance: Average daily revenue per available room (RevPAR) as of the TTM July 2016 of $30.20 reflected an increase of 4.2% over 2015 and 12.7% above 2014.
Experienced Sponsorship and Management: The sponsor, WoodSpring Hotels Holdings, was founded by Jack DeBoer and currently owned by private-equity firm Lindsay Goldberg. In addition to the Value Place brand (founded in 2003), Mr. DeBoer founded the Residence Inn, Summerfield Suites and Candlewood Suites brands, which he successfully grew and ultimately sold.
RATING SENSITIVITIES
Fitch found that the 'AAAsf' class could withstand an approximate 71.5% decrease to the most recent actual net cash flow (NCF) prior to experiencing $1 of loss to the 'AAAsf' rated class. Fitch performed several stress scenarios in which the Fitch NCF was stressed. Fitch determined that a 62.6% reduction in Fitch's implied NCF would cause the notes to break even at a 1.0x debt service coverage ratio (DSCR), based on the actual debt service.
Fitch evaluated the sensitivity of the ratings for class A and found that a 17% decline in Fitch's implied NCF would result in a one-category downgrade, while a 48% 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'.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Fitch was provided with third-party due diligence information from Ernst & Young 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 the analysis. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained on the bottom of the related rating action commentary (RAC).
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by accessing the appendix referenced under "Related Research" below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated May 31, 2016.
Additional information is available at www.fitchratings.com.
Applicable Criteria
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 18 Aug 2016)
https://www.fitchratings.com/site/re/885802
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
https://www.fitchratings.com/site/re/883130
Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)
https://www.fitchratings.com/site/re/735382
Related Research
JPMCC 2016-WSP
https://www.fitchratings.com/site/re/886409
JPMCC 2016-WSP -- Appendix
https://www.fitchratings.com/site/re/887409
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1011283
ABS Due Diligence Form 15E 1
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1011283
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.