DBRS Morningstar Confirms All Classes of Ashford Hospitality Trust 2018-KEYS

DBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2018-KEYS issued by Ashford Hospitality Trust 2018-KEYS as follows:

-- Class A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (high) (sf)
-- Class D at A (low) (sf)
-- Class E at BBB (low) (sf)
-- Class X-EXT at B (sf)
-- Class F at B (low) (sf)

All trends are Stable. DBRS Morningstar also maintained the Interest in Arrears designation on Class F. Although the outstanding shortfall is a relatively nominal amount of $22,995, based on information received from the servicer, the shortfall is not expected to be reimbursed.

The rating confirmations and Stable trends reflect the overall stable performance of the transaction since DBRS Morningstar’s last review in September 2021.

The subject transaction is collateralized by six loans, which are not cross-collateralized. The senior mortgage loan proceeds of $982.0 million, along with mezzanine debt of $288.2 million, refinanced existing debt of $1.1 billion, funded $14.1 million of upfront reserves and $25.6 million in closing costs, and facilitated a $163.4 million cash-equity distribution. The loans are interest only (IO) throughout the 24-month initial term with five one-year extension options, with a fully extended maturity date of June 2025. The loans are secured by a total of 34 hotel properties located across 16 states with the largest concentration by allocated loan balance in California at 34.7%. The hotels are flagged by various brands owned by Marriott International, Hyatt Hotels Corporation, and Hilton Hotels & Resorts with a combined total room count of 7,270 keys consisting of 19 full-service hotels with 4,767 keys, 10 select-service hotels with 1,160 keys, and five extended-stay hotels with 893 keys.

At issuance, the collateral portfolio was valued at $1.7 billion in aggregate and $1.6 billion on an individual basis. New appraisals obtained by the special servicer as of February and March 2021 valued the collateral on an as-is basis at a combined figure of $1.3 billion, a decline from the issuance figure but above the DBRS Morningstar Value of $1.2 billion, derived in 2020. As of the most recent financials, the loans reported a weighted-average (WA) debt service coverage ratio (DSCR) of 1.81 times (x) for the trailing twelve months (T-12) ended March 31, 2022, compared with the DSCR of 1.50x for YE2021. On an individual basis Pools A, B, C, D, E and F, reported DSCRs of 2.24x, 0.46x, 1.17x, 3.31x, 2.30x, and 1.18x, respectively, for the T-12 ended March 31, 2021. Performance continues to improve but remains depressed from pre-pandemic levels when the DSCR was reported at 2.40x on a combined basis for YE2019.

All six loans were previously in special servicing in June 2020 for maturity default but the borrower was granted a six-month forbearance period from April to October 2020 where debt service payments and monthly reserve deposits were deferred. Repayment of the deferred amounts was completed by June 2021 and the loans were returned to the master servicer in March 2022. These loans are on the servicer’s watchlist because of the upcoming June 2022 maturity date. Initially, Pool D was expected to be repaid but the borrower has more recently submitted a request to exercise the third of five maturity extension options that would extend the maturity to June 2023. In addition, Pools B and D are being monitored for late tax payments. Pool B is also being monitored for a low DSCR.

STR reports, dated March and April 2022, were provided for all 34 properties. On a WA basis, occupancy, average daily rate (ADR), and revenue per available room (RevPAR) figures were reported at 63%, $152, and $103, respectively, for the T-12 ended March 31, 2022, or April 30, 2022. The properties have seen minor improvements from the figures of 49%, $127, and $62, respectively, for the T-12 ended July 31, 2021, but remain depressed from the figures of 79%, $160, and $126, respectively, at issuance. Although performance has not rebounded to pre-pandemic levels, it is noteworthy that the collateral hotels reported a WA RevPAR penetration figure of 107% with individual penetration rates ranging from 98% to122%.

The loan sponsor is Ashford Hospitality Trust, Inc., a well established owner and operator of approximately 120 hotel assets across the United States. The sponsor acquired or constructed the hotels between 1998 and 2015, with most assets acquired between 2003 and 2007, and invested approximately $227.7 million ($29,256 per key) between 2013 and 2017.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/ Social/Governance (ESG) factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for this transaction.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data. For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is the North American CMBS Surveillance Methodology (March 4, 2022), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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