DBRS Confirms All Classes and Assigns Positive Trends to Five Classes of GSCCRE Commercial Mortgage Trust 2015-HULA

DBRS, Inc. (DBRS) confirmed all classes of Commercial Mortgage Pass-Through Certificates issued by GSCCRE Commercial Mortgage Trust 2015-HULA as follows:

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

Additionally, DBRS has changed the trends on Classes C, D, E, F and X-NCP to Positive from Stable. The trends on Classes A and B remain Stable.

The rating confirmations and trend changes reflect the continued stable performance of the collateral since the transaction closed in October 2015. The whole loan consists of a $299.1 million trust note and two subordinate notes totaling $73.9 million as of the September 2017 remittance. The loan had an initial maturity date in August 2017; however, the borrower exercised a one-year extension option. The borrower has four one-year extension options remaining. In conjunction with the loan extension, the notional Class X-CP was paid in full and has had its respective rating discontinued.

The loan is secured by the fee simple and leasehold interests in three distinct components of the master-planned Hualalai at Historic Ka’upulehu luxury resort community situated along Kohala Coast in Kailua-Kona on the Big Island of Hawaii. The collateral includes the leasehold interest in (1) the 243-key Four Seasons Resort Hualalai hotel; (2) the private membership Hualalai Club operated by the Four Seasons; and (3) the fee simple interest in the remaining 55 acres of residential land within the master-planned residential resort community intended for future sale. The five-star resort and membership club is situated on the Kohala Coast, offering eight restaurants, a 30,700-square foot (sf) world-class spa and sports club, seven pools, over 37,000 sf of indoor and outdoor meeting and event space, five retail outlets and two golf courses.

The collateral’s performance has remained stable year over year, as the trailing 12 months (T-12) ending June 30, 2017, whole-loan debt service coverage ratio (DSCR) was 2.01 times (x), which compares similarly to the YE2016 and YE2015 figures of 1.87x and 2.00x, respectively. According to the T-12 June 2017 Smith Travel Research report, occupancy was 85.6% and the average daily rate (ADR) was $1,187, resulting in revenue per available room (RevPAR) of $1,016. These figures are representative of increases of 1.2%, $49 and $56, respectively, over the YE2016 reported figures. The property continues to significantly outperform its competitive set, with occupancy, ADR and RevPAR penetrations of 115.9%, 370.2% and 429.1%, respectively, as it has little to no direct competition for the wealthy demand demographic it serves. It is DBRS’s opinion that the true competitive set for the subject consists of other luxury resorts found on Hawaii’s other islands.

Demand for the subject is primarily driven by guests the continental United States as well as other countries, particularly Japan and Canada. According to the July 2017 year-to-date (YTD) statistics from the Hawai’i Tourism Authority, total visitor arrivals to the Big Island of Hawaii increased to 1.0 million people, representative of a 14.0% increase over YTD July 2016 figures. More specifically, the Kona side of the island experienced a 13.7% increase in visitors to approximately 893,000 people over the same period. Visitorship to the Kona coast increased across all four core markets: Western U.S. (+10.5%), Eastern U.S. (+12.6%), Japan (+34.6%) and Canada (+13.7%). According to YE2016 additional data provided by the Hawai’i Tourism Authority, total daily visitor spending on the island of Hawaii was $5.6 million, with total hotel occupancy at 68.8%, up 3.1% from 2015.

The rating assigned to Class F materially deviates from the higher rating implied by the quantitative results. DBRS considers a material deviation to be a rating differential of three or more notches between the assigned rating and the rating implied by the quantitative results that is a substantial component of a rating methodology. The deviations are warranted given the sustainability of loan performance trends is not demonstrated.

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

The principal methodology is CMBS North American Surveillance, which can be found on dbrs.com under Methodologies.

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

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

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