DBRS Finalizes Provisional Ratings on J.P. Morgan Chase Commercial Mortgage Securities Trust 2015-COSMO

DBRS, Inc. (DBRS) has today finalized its provisional ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2015-COSMO (the Certificates) issued by J.P. Morgan Chase Commercial Mortgage Securities Trust 2015-COSMO. The trends are Stable.

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

The collateral for the transaction consists of the fee, condominium and operating leasehold interests in a 2, 959-key luxury hotel and casino located in Las Vegas, Nevada. In addition to the $875.0 million mortgage loan, there is a $295.0 million senior mezzanine loan and $130.0 million junior mezzanine loan outside of the trust. The sponsor is also contributing $492.0 million of cash equity to the acquisition. The loan, together with the mezzanine loans and sponsor equity, financed a purchase price of $1.7 billion, closing costs of $38.4 million and a working capital account surplus reserve of $23.6 million.

The collateral includes the fee interest in amenities, including but not limited to 458,000 square feet (sf) of meeting and group space; over 151,500 sf of convention and banquet facilities; a 99,719 sf casino; over 96,000 sf of entertainment space; 50,000 sf of spa and fitness facilities; and 35,744 sf of retail space. The property also includes 17 condominium units, 15 of which are owned by third parties as condo-hotel units and are not collateral for the loan. The sponsor, Blackstone Real Estate Partners VII-NQ L.P., is an affiliate of the Blackstone Group L.P. (Blackstone). The property is self-managed by Blackstone. As of December 2014, Blackstone had approximately $290 billion of assets under management. The property has benefited from a Marriott Autograph Collection Affiliation agreement since the property opened in December 2010.

The property is located at the center of the Las Vegas Strip, a 4.2 mile stretch of some of the largest hotel, casino and resort properties in the world. The Las Vegas hotel market has averaged 89.5% occupancy from 1985 to 2013 with the lowest occupancy occurring in 2010 at 83.5%. The property has exhibited strong booking momentum over the past few years, with an increase of 23.4% in revenue per available room (RevPAR) to $291.28 in the T-12 period ending January 31, 2015, from $223.11 in 2012. As of YE2014, the property leads its respective competitive set with a RevPAR $287.26, representing a penetration rate of 133.5%. Gaming revenue (before promotions) comprised 22.0% of the properties’ total revenue for YE2014, which is much smaller than the 43.1% of total casino income-to-total revenue for casinos with gaming revenue of $1 million and over within Clark County, Nevada, for YE2014.

The DBRS net cash flow (NCF) is $111,536,639, representing a -12.3% variance to the Issuer’s NCF. Although the loan does not amortize, the going-in leverage is reasonable, with a DBRS Debt Yield of 12.7%. In addition, the DBRS refinance debt service coverage ratio (DSCR) is at 1.27 times (x), commensurate with the initial ratings assigned by DBRS and based on a stressed 10.00% refinance constant. The loan has minimal default risk during the five-year fully extended loan term, as the DBRS Term DSCR is quite high at 2.11x. The DBRS loan-to-value is 76.5%, based on a 9.75% cap rate, and utilizes a DBRS value of $1.14 billion that is a 37.0% and 44.3% discount to the appraised as-is value of $1.82 billion and stabilized value of $2.01 billion, respectively. As a result of the high-quality, irreplaceable Las Vegas Strip location and corresponding leverage, the Certificates backed by the $875 million of first mortgage debt are assigned ratings between AAA and B (high).

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

All classes have been privately placed.

The applicable methodology is CMBS Rating Methodology, which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.
The Rule 17g-7 Report of Representations and Warranties is hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.