Morningstar DBRS Confirms Credit Ratings on All Classes of Ashford Hospitality Trust 2018-ASHF

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

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

All trends are Stable.

The credit rating confirmations and Stable trends reflect Morningstar DBRS' outlook for the loan. Although the underlying collateral continues to deleverage, following the release of the largest property in the portfolio, Courtyard by Marriott Boston Downtown (10.5% of the allocated loan amount (ALA) at issuance) as of the February 2025 payment period, and the $35.8 million principal curtailment that was paid to exercise the loan's fifth and final extension option, the loan surpassed its fully extended maturity date in April 2025. Per the servicer's most recent commentary, a two-month forbearance has been granted to give the borrower more time to close its pending refinancing. Additionally, although the YE2024 weighted-average (WA) revenue per available room (RevPAR) for the unreleased properties surpassed the issuance level by 16.8%, the consolidated net cash flow (NCF) declined year over year, to $71.3 million, as of YE2024, from $78.9 million at YE2023, and is also below the issuance NCF of $76.9 million.

At issuance, the subject interest-only (IO), floating-rate loan was collateralized by a portfolio of 22 hotel properties, totaling 5,269 keys, with multiple formats, including all-suite, full-service, limited-service, and extended-stay hotels, across 12 states. There is also additional senior and junior mezzanine financing, which had an initial balance of $202.3 million and is coterminous with the trust debt. As of the May 2025 remittance, there are 18 properties remaining in the pool following the release of four properties since issuance (previous ALA of $136.2 million (17.4%) at issuance). The current trust balance is $560.8 million, which reflects a collateral reduction of 24.6% since issuance. Individual assets can be released at a price of 115.0% of the ALA as outlined in the loan documents. The loan is sponsored by Ashford Hospitality Trust, Inc., an experienced hotel investment company and publicly traded real estate investment trust, which had invested $227.5 million into the portfolio since its acquisition in 2013.

For the 18 properties remaining in the portfolio, the WA occupancy rate, average daily room, and RevPAR were 67.6%, $189, and $128, respectively, according to the YE2024 financials, slightly below the metrics reported at YE2023 of 69.9%, $185, and $130, respectively. The issuance figures were 74.6%, $146, and $109, respectively.

Given the significant principal paydown of 13.8% since Morningstar DBRS' last credit rating action in June 2024, Morningstar DBRS updated the loan-to-value ratio (LTV) sizing benchmarks as part of this review. Morningstar DBRS analyzed the cash flow under both a base-case and stressed scenario to test the durability of the credit ratings. In both scenarios, a 9.25% capitalization rate was applied. The base-case scenario, which is based on a standard surveillance haircut to the consolidated YE2024 NCF for the remaining properties, results in a base-case Morningstar DBRS value of $755.7 million (trust LTV of 78.1%). In the stressed scenario, which included a 20% haircut to the YE2024 NCF, Morningstar DBRS derived a stressed value of $616.9 million, resulting in a trust LTV of 95.7% (whole loan LTV of 128.4%). In addition, Morningstar DBRS maintained the positive qualitative adjustments to the LTV sizing benchmarks considered at issuance, which total 4.0% to reflect the property's cash flow volatility, property quality, and market fundamentals.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS   
There were no Environmental, Social, or Governance factors that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024): https://dbrs.morningstar.com/research/437781.

Class X-EXT is an interest-only (IO) certificate that references a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

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

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

The principal methodology is North American CMBS Surveillance Methodology (February 28, 2025): https://dbrs.morningstar.com/research/448963.

Other methodologies referenced in this transaction are listed at the end of this press release.

The Morningstar DBRS credit ratings assigned to Classes C and D are lower than the results implied by the LTV sizing benchmarks. The variances are warranted as the loan has surpassed its final maturity, and given the higher-interest-rate environment, the borrower may face additional challenges securing takeout financing. Furthermore, despite the increased credit support driven by the notable paydown, the transaction is more exposed to adverse selection as the portfolio's cash flow is below issuance expectations.

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-DBRS@morningstar.com.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

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

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- North American Single-Asset/Single-Borrower Ratings Methodology (February 28, 2025): https://dbrs.morningstar.com/research/448962.
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024): https://dbrs.morningstar.com/research/439702.
-- Legal Criteria for U.S. Structured Finance (December 3, 2024): https://dbrs.morningstar.com/research/444064.
-- Interest Rate Stresses for U.S. Structured Finance Transactions (March 27, 2025): https://dbrs.morningstar.com/research/450750.
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024): https://dbrs.morningstar.com/research/438283.

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at (July 17, 2023): https://dbrs.morningstar.com/research/417279.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.