Fitch Affirms HILT 2014-ORL Mortgage Trust Series 2014-ORL
The certificates represent the beneficial interest in a trust that holds a single two-year floating-rate interest-only mortgage loan, subject to five one-year extension options, in the amount of $345 million secured by the fee interest in Hilton Orlando, a 1,417-room full service hotel located at 6001 Destination Parkway in Orlando, FL. A full list of rating actions follows at the end of this ratings action commentary.
KEY RATING DRIVERS
The affirmations and Stable Outlooks reflect the stable performance of the collateral as expected since issuance. The collateral has demonstrated an upward trend in cash flow since it was constructed in 2009, which parallels the U.S. lodging industry's performance over the same time period. The transaction is secured by a single hotel property and therefore more susceptible to single event risk related to the market. Hotel performance is considered to be more volatile due to their operating nature. Fitch will continue to monitor the subject property's performance to ensure that revenues and incomes considered at the time of Fitch's initial ratings are sustainable over the loan term.
The Hilton Orlando was constructed in 2009 and has 232,000 sf of meeting and event facilities, a full service salon and spa, a large fitness center and six food and beverage venues. Amenities include a large family pool, a 10,000-sf deck, a quiet pool with whirlpool, lazy river, 12 cabanas, water slide, nine-hole executive putting course, jogging track, two fire pits, as well as volleyball, basketball and tennis courts. The hotel is well located within Orlando's major entertainment district, within five-15 minutes of SeaWorld Orlando, Universal Orlando Resort and Walt Disney World Resort.
The property's performance has remained stable since issuance. Occupancy, ADR, and RevPAR as of trailing twelve month (TTM) March 2015 reported at 71.2%, $172.44, and $122.71, respectively, compared to TTM May 2014 at 70.6% occupancy, $167.36 ADR, and $118.20 RevPAR. The year end (YE) 2014 net cash flow (NCF) was approximately 19% over YE 2013 NCF, primarily due to a 16% increase in revenue. The improved revenue was driven by a 31% increase in 'Food & Beverage' income which includes higher revenue generated by The Promenade, a recently opened 50,000 square foot outdoor event space at the hotel. Fitch's stressed DSCR and LTV for the entire trust at issuance was 1.07x and 98.3%, respectively. The Fitch stressed DSCR and LTV at issuance through class D, the lowest tranche rated by Fitch Ratings in this transaction, was 1.56x and 67.3%, 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 'HILT 2014-ORL Mortgage Trust, Series 2014-ORL (US CMBS)' (July 8, 2014), 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:
-- 'HILT 2014-ORL Mortgage Trust, Series 2014-ORL - Appendix' (July 8, 2014).
Fitch has affirmed the following ratings:
--$116,508,000 class A at 'AAAsf'; Outlook Stable;
--$2,639,250 * class X-FP at 'AAAsf'; Outlook Stable;
--$10,557,000 * class X-CP at 'AAAsf'; Outlook Stable;
--$13,196,250 * class X-EXT at 'AAAsf'; Outlook Stable;
--$43,885,000 class B, at 'AA-sf'; Outlook Stable;
--$32,623,000 class C at 'A-sf'; Outlook Stable;
--$43,108,000 class D at 'BBB-sf'; Outlook Stable
* Notional amount and interest-only.
Fitch does not rate the $67,963,000 class E certificates or the $40,913,000 class F certificates.
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