DBRS Finalizes Provisional Ratings on J.P. Morgan Chase Commercial Mortgage Securities Trust 2017-MAUI

DBRS, Inc. (DBRS) has today finalized its provisional ratings on the followings classes of Commercial Mortgage Pass-Through Certificates, Series 2017-MAUI (the Certificates) issued by J.P. Morgan Chase Commercial Mortgage Securities Trust 2017-MAUI:

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

All trends are Stable.

All classes have been privately placed. The Class X balance is notional.

The collateral for the transaction consists of the fee interest in the Four Seasons Maui at Wailea, a 383-key luxury resort on the Hawaiian island of Maui. The property has an irreplaceable oceanfront location within the Wailea Resort master planned community and is the first Four Seasons Resort Worldwide. Situated on a 16.2-acre site, collateral amenities include, but are not limited to, four food and beverage (F&B) venues, 37,571 square feet (sf) of meeting space (16,827 sf of indoor meeting space and 20,744 sf of outdoor meeting space), a 21,000 sf spa, 12,636 sf of retail, a 486-space two-story parking structure, three swimming pools and two rooftop tennis courts. The property is one of the premier resorts on the island and is the only AAA Five-Diamond and Forbes Travel Guide Five-Star luxury resort on Maui.

The loan sponsor, MSD Capital, L.P. (MSD), acquired the property in 2004 for a purchase price of $280.0 million ($731,070 per key). Founded in 1998, MSD is an investment vehicle that exclusively handles the capital of Michael Dell and his family. Within its portfolio, MSD currently owns two similar luxury resorts: the Four Seasons Hualalai at Historic Ka’upulehu and the Fairmont Miramar hotel in Santa Monica, California. Due to the success and prestige of the subject and the Four Seasons Hualalai at Historic Ka’upulehu, MSD is considered to be one of the largest revenue-generating owners for Four Seasons Hotels and Resorts, Inc. Since acquiring the asset, MSD has invested approximately $145.0 million ($378,500 per key), in capital improvements with the most recent major renovation occurring between 2015 and 2016 at a cost of $56.4 million ($147,321 per key), which included a $42.9 million ($111,922 per key) transformation of all guest rooms and corridors. Over the next three years, management intends to spend an additional $18.8 million in capital expenditures, which will include the renovation of the lobby, spa, pool, meeting space and F&B outlets, among many others.

Loan proceeds of $469.0 million, along with $131.0 million of mezzanine debt, serves to return $64.0 million of equity back to the sponsor and refinance $525 million of debt that was originated in 2014 during which time the $350 million mortgage loan was securitized in CSMC 2014-TIKI. The first mortgage is a 24-month term floating-rate (one-month LIBOR plus 1.951% per annum) interest-only loan with five 12-month extension options. Prior to that securitization, the subject property was collateral for a $425 million mortgage loan that was securitized in CD 2007-CD4 and GECMC 2007-1. The property was severely affected by the economic recession and subsequently went into monetary default in 2010. Tthe sponsor contributed approximately $18.0 million of equity for debt restructuring andthe loan was bifurcated with a $350 million A-note and $75 million B-note.Both notes were fully repaid as part of the 2014 refinancing.

HVS has determined the as-is market value of the property to be $910,700,000 ($2,377,807 per key) based on a cap rate of 5.5%. Additionally, the appraiser concluded an as-stabilized appraised value of $976.4 million, which anticipates performance to improve as the subject benefits from the recent renovation that occurred. The DBRS value of $434.6 million ($1,134,738 per key) equates to a substantial 52.3% discount to the as-is appraised value. The DBRS cap rate of 9.5% is likely at least 400 basis points above a current market cap rate, allowing for significant reversion to the mean in lodging valuation metrics. While leverage on the full $469.0 million mortgage loan is high at a DBRS loan-to-value (LTV) of 107.9%, the last dollar of mortgage debt is unrated, and the cumulative investment-grade-rated proceeds of $304.0 million have a more modest LTV of 69.9%.

The ratings assigned to the Certificates by DBRS are based exclusively on the credit provided by the transaction structure and underlying trust assets. All classes will be subject to ongoing surveillance, which could result in upgrades or downgrades by DBRS after the date of issuance.

For more information on this transaction and supporting data, please log into www.ireports.dbrs.com. DBRS will continue to monitor this transaction with periodic updates provided on the DBRS CMBS IReports platform.

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

The principal methodology is North American Single-Asset/Single-Borrower Methodology, which can be found on dbrs.com under Methodologies.

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

With regard to due diligence services, DBRS was provided with the Form ABS Due Diligence-15E (Form 15-E), which contains a description of the information that the third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While DBRS did not rely on the due diligence services outlined in Form 15-E, DBRS did use the Data File outlined in the Independent Accountant’s Report in its analysis to determine the ratings.

The full report providing additional analytical detail is available by clicking on the link below or by contacting us at info@dbrs.com.