DBRS Confirms All Classes of Cosmopolitan Hotel Trust 2016-COSMO

DBRS Limited (DBRS) confirmed all classes of Commercial Mortgage Pass-Through Certificates, Series 2016-COSMO (the Certificates) issued by Cosmopolitan Hotel Trust 2016-COSMO, as listed below:

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

All trends are Stable.

The rating confirmations reflect the stable performance of the transaction, which remains in line with DBRS’s expectations at issuance. The transaction consists of a $1.037 billion trust loan secured by the fee interest in the Cosmopolitan of Las Vegas, a 3,005-room luxury hotel and casino situated in an excellent mid-Las Vegas Strip location between the Bellagio and CityCenter in Las Vegas, Nevada.

The subject was built from 2004 to 2010, and represents one of the newest properties on the Las Vegas Strip. The subject is situated on 8.5 acres and consists of two high-rise towers. Amenities include over 250,000 sf of convention and banquet space, 111,500 sf of casino space, 96,000 sf of entertainment space, 23,500 sf of retail space, 50,000 sf of spa and fitness facilities and a five-level underground parking garage. The subject loan is IO throughout and has an initial two-year term, with three one-year extension options thereafter.

The transaction benefits from institutional sponsorship as the loan sponsor is an affiliate of Blackstone Real Estate Partners VII, which is currently the largest hotel owner in the United States. At issuance, the sponsor completed or was in the process of completing approximately $141.5 million in capital improvements at the subject, with plans to spend an additional $125 million over the following 24 months to complete a refresh of the existing rooms. The property is self-managed by Blackstone.

As of the T-12 July 2017 operating statement, the property was 95.0% occupied with an ADR of $316 and RevPAR of $300, which demonstrates an improvement from issuance, when the subject reported a 94.4% occupancy rate, an ADR of $304 and RevPAR of $287. According to the T-12 March 2017 financials, the subject reported a $235,643,124 NCF figure, representing a 57.4% increase from the DBRS term NCF figure, and a 37.7% increase from the Issuer’s UW figure. This growth was driven by an increase in room revenue and rental rates, in addition to a decline in total operating expenses, primarily driven by repairs and maintenance and advertising.

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

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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