Fitch Affirms Citigroup Commercial Mortgage Trust 2015-SHP2

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed six classes of Citigroup Commercial Mortgage Trust 2015-SHP2 commercial mortgage pass-through certificates series 2015-SHP2. The certificates represent the beneficial interest in a trust that holds a single two-year floating-rate interest-only first-lien mortgage loan, subject to three one-year extension options, in the amount of $215 million secured by 22 hotel properties located in 10 states across 15 markets representing 10 different franchise brands. A full list of rating actions follows at the end of this release.

KEY RATING DRIVERS

The affirmations reflect the stable performance of the collateral since issuance. The portfolio is primarily secured by select and limited service hotels close to demand generators that mitigate the volatile operating nature of the industry. Fitch will continue to monitor the portfolio's performance to ensure that revenues and incomes considered at the time of Fitch's initial ratings are sustainable over the loan term.

Proceeds of the loan were used to acquire the properties for $318.1 million, establish a property improvement plan (PIP) reserve of approximately $30.9 million, establish a ground lease acquisition reserve of $2.6 million and pay closing costs of approximately $10.2 million. At issuance, the sponsor planned to invest ($11,546 per key) in the properties as part of required PIPs over the initial loan term. This capital investment in the individual properties should maintain the superior competitive position of the assets in their respective submarkets.

The portfolio's performance is consistent with Fitch's expectation since issuance. Occupancy, average daily room rate (ADR), and revenue per average room (RevPAR) as of full-year (FY) 2015 were reported at 73.9%, $123.10, and $91.02, respectively, compared with the trailing 12 months (TTM) March 2015 74.7% occupancy, $113.43 ADR, and $87.99 RevPAR. This continued a trend of strong performance growth as the FY 2014 occupancy, ADR, and RevPAR were 76.9%, $111.86, and $86.06, respectively. The Fitch net cash flow (NCF) based on FY 2015 was approximately 3.2% lower than Fitch's issuance NCF, primarily due to more conservative assumptions related to gross room revenues in accordance with Fitch's economic view of the hotel industry. Fitch's stressed DSCR and LTV through class D, the lowest tranche rated by Fitch in this transaction, at issuance was 1.68x and 65%, respectively. The Fitch stressed FY 2015 DSCR and LTV through class D were 1.51x and 71.3%, respectively.

RATING SENSITIVITIES

The Rating Outlook for all classes remains Stable. Due to the recent issuance of the transaction and stable performance, Fitch does not foresee positive or negative ratings migration until a material economic or asset level event changes the transaction's portfolio-level metrics. Additional information on rating sensitivity is available in the report 'Citigroup Commercial Mortgage Trust 2015-SHP2 (US CMBS)' (July 17, 2015), available at www.fitchratings.com.

DUE DILIGENCE USAGE

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

A comparison of the transaction's Representations, Warranties, and Enforcement (RW&E) mechanisms to those of typical RW&Es for the asset class is available in the following report:

-- 'Citigroup Commercial Mortgage Trust 2015-SHP2 -- Appendix' (July 17, 2015).

Fitch affirms the following classes as indicated:

--$89,545,000 class A at 'AAAsf'; Outlook Stable;

--$46,545,000 * class X-CP at 'AAAsf'; Outlook Stable;

--$46,545,000 * class X-NCP at 'AAAsf'; Outlook Stable;

--$18,455,000 class B, at 'AA-sf'; Outlook Stable;

--$13,000,000 class C at 'A-sf'; Outlook Stable;

--$21,000,000 class D at 'BBB-sf'; Outlook Stable

* Notional amount and interest-only.

Fitch does not rate the $38,000,000 class E certificates or the $35,000,000 class F certificates.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 18 Jul 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884963

Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 27 Aug 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=870009

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=883130

Related Research

Citigroup Commercial Mortgage Trust 2015-SHP2 -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868645

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1009645

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1009645

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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160728006335/en/

Fitch Ratings
Primary Analyst
Jay Bullie, CFA
Associate Director
1-312-368-2079
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Committee Chairperson
Britt Johnson
Senior Director
+1-312-606-2341
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: [email protected]

Source: Fitch Ratings

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