DBRS Confirms Classes of J.P. Morgan Chase Commercial Mortgage Securities Trust 2015-COSMO

DBRS Limited (DBRS) has today confirmed the ratings of the following Commercial Mortgage Pass-Through Certificates, Series 2015 COSMO issued by JPMCC 2015-COSMO:

-- Class A 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 B at B (high) (sf)

All trends are Stable. Class X-CP has been discontinued and therefore its rating has been removed.

The rating confirmations reflect the continued stable performance of the transaction. This transaction closed in March 2015, consisting of an $875.0 million loan secured by The Cosmopolitan luxury hotel and casino located in Las Vegas, Nevada. There is also a $295.0 million senior mezzanine loan and a $130.0 million junior mezzanine loan outside of the trust. The property opened in December 2010 and is one of the newest hotels on the Strip, featuring 2,966 rooms; 25 restaurants, lounges and bars; over 200,000 square feet (sf) of convention and banquet facilities; a 110,000 sf casino; 53,000 sf of entertainment space; 60,000 sf of retail space; a 50,000 sf spa and fitness facility; a 1,800-seat theatre; and a five-level underground parking garage. The subject is located in an irreplaceable location right in between the Bellagio Hotel and Casino and ARIA Resort & Casino. In addition, the loan benefits from its strong sponsor, Blackstone Real Estate Partners VII, which is an affiliate of Blackstone Group L.P., the largest hotel owner in the United States.

According to YE2015 financials, the occupancy, average daily rate (ADR) and revenue per available room (RevPAR) were 93.3%, $310.81 and $289.86, respectively. These metrics are in line with the trailing 12 months (T-12) November 2014 figures, which reported occupancy, ADR and RevPAR at 95.0%, $309.35 and $292.23, respectively. The YE2015 figures are also in line with the DBRS underwritten occupancy, ADR and RevPAR of 91.5%, $311.91 and $285.00, respectively. According to Visitor Volume Las Vegas, the total visitor volume in 2015 increased by 5.2% when compared with the prior year. In addition, occupancy for hotels located along the Strip was 90.2% for YE2015, increasing from the 2014 occupancy of 88.8%.

This loan is interest only for the entire term, which is initially two years, with three one-year extension options available to the borrower. According to YE2015 financials, the property is performing well, as the effective gross income (EGI) increased by 31.0% when compared with DBRS underwritten figures as a result of increases from both room and food & beverage revenues. At issuance, the subject was deemed to be underperforming in terms of gaming revenue representation when compared with the average for properties on the Strip; however, this revenue source has improved. According to the Nevada Gaming Control Board, hotels’ average gaming revenue in 2014 was approximately 40.0% of total revenues; however, the subject only reported a 22.2% of its total revenue from gaming for the T-12 period ending January 2015. At YE2015, the reported gaming revenue increased, representing 31.2% of total revenues (before promotions). According to the YE2015 sales report, the overall retail sales decreased by 11.9% when compared with YE2014; however, retail revenue only represents 1.2% of total DBRS underwritten revenues. According to the YE2015 OSAR, the property reported a net cash flow of $193.6 million; however, it appears certain operating expenses, including Repairs & Maintenance and Advertising & Marketing, were not fully captured, potentially inflating the reported figures. Regardless, property performance remains stable as the DBRS underwritten DSCR for the loan was 2.11x.

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

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 to the right under Related Research or by contacting us at info@dbrs.com.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodologies are North American CMBS Rating Methodology (March 2016) and CMBS North American Surveillance (December 2015), which can be found on our website under Methodologies.