News Column

Fitch Affirms SCG 2013-CWP Hotel Issuer Inc.

September 3, 2014

NEW YORK--(BUSINESS WIRE)-- 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):

--$36.8 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 issuance in 2013. As of June 30, 2014, the portfolio TTM net cash flow (NCF) was reported at $59.4 million versus the reported TTM NCF of $58.6 million at issuance. In addition, Fitch's stressed debt service coverage ratio (DSCR) and loan to value (LTV) for the trust component of the debt are 1.47x and 71%, respectively, compared with 1.41x and 73.9%, respectively at issuance. There is an $80 million interest-only mezzanine loan subordinate to and co-terminus with the trust mortgage.

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 June 2014) 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. No rating actions are expected unless there are material changes to the property occupancy and cash flow. Additional information on rating sensitivity is available in the report 'SCG 2013-CWP Hotel Issuer Inc.' (Jan. 30, 2014), available at www.fitchratings.com.

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:

--'SCG 2013-CWP Hotel Issuer Inc. -- Appendix' (Jan. 30, 2014).

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'SCG 2013-CWP Hotel Issuer Inc.' (Jan. 30, 2014);

--'SCG 2013-CWP Hotel Issuer Inc. -- Appendix' (Jan. 30, 2014);

--'Global Structured Finance Rating Criteria' (Aug. 4, 2014);

--'Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions' (Sept. 20, 2013).

Applicable Criteria and Related Research:

SCG 2013-CWP Hotel Issuer Inc.

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=729136

SCG 2013-CWP Hotel Issuer Inc. -- Appendix

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732564

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=718468

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=863714

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.



Fitch Ratings

Primary Analyst

Jeffrey Diliberto, +1 212-908-9173

Director

Fitch Ratings, Inc.

33 Whitehall Street

New York, NY 10004

or

Committee Chairperson

Mary MacNeill, +1 212-908-0785

Managing Director

or

Media Relations:

Sandro Scenga, +1 212-908-0278

sandro.scenga@fitchratings.com

Source: Fitch Ratings


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