DBRS Morningstar Confirms All Classes of Hawaii Hotel Trust 2019-MAUI, Removes All Classes from Under Review with Negative Implications

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2019-MAUI (the Certificates) issued by Hawaii Hotel Trust 2019-MAUI as follows:

-- Class A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at AA (low) (sf)
-- Class D at A (sf)
-- Class E at BBB (low) (sf)
-- Class F at B (high) (sf)
-- Class G at B (low) (sf)
-- Class HRR at CCC (sf)

With this review, DBRS Morningstar removed all classes from Under Review with Negative Implications where they were placed on September 24, 2020. The trends on all classes are Stable, with the exception of Classes F and G, which carry a Negative trend because of sustained underlying pressures and lasting residual effects of the Coronavirus Disease (COVID-19) global pandemic. The rating confirmations reflect DBRS Morningstar’s view that, despite a significant interruption of operations and cash flow in 2020 related to the pandemic, the property is likely well positioned to rebound and the assigned ratings adequately reflect the remaining risk resulting from the pandemic. The loan has performed during the pandemic, with no delinquencies or defaults reported to date.

The collateral for the Certificates is a $650.0 million mortgage loan on a Four Seasons-branded luxury, five-star resort hotel in Wailea, Hawaii. The hotel features 383 guest rooms, four food and beverage offerings, specialty retail shops, and 38,000 square feet of meeting space. The wide range of amenities includes a spa, three outdoor pools, tennis courts, a games room and fitness center, and preferred access to the 54-hole Wailea Golf Club directly across Wailea Alanui Drive from the hotel. The hotel offers direct access to Wailea Beach as well as stunning views of the island’s volcanic mountains and westward to the bay and Pacific Ocean.

Wailea has one of the highest barriers to entry of any resort market in the world. Available sites are extremely rare or nonexistent, and zoning is complex and protective. The hotel is owned fee simple, which is highly unusual for any site on the island. Since 2006, the sponsor has invested approximately $161.0 million, or $420,400 per room, including more than $56.0 million in renovations and upgrades in 2016.

The coronavirus pandemic caused economic strain on the hotel for most of 2020. The subject’s reliance on leisure demand will continue to put significant stress on the hotel’s performance in the short to medium term. While hotel operations resumed in December 2020 after having been closed for several months, the hotel is facing increased pressure as the country experiences an uptick in coronavirus cases that led to the Governor of Hawaii urging tourists not to visit the island and to limit to travel for essential purposes.

As of August 2021, the loan remains on the servicer’s watchlist as performance remains distressed as a result of the pandemic.

Although the hotel produced negative cash flow in 2020, the sponsor continues to support the loan and has not requested any coronavirus-related forbearance to date. Furthermore, the hotel has maintained its strong historical performance among its competitors, ranking first in penetration rates for average daily rate (ADR) and revenue per available room (RevPar) for the trailing 12 months (T-12) in each of the previous three years. According to a Smith Travel Research report, the subject ranked first in penetration rates for average daily rate (ADR) and revenue per available (RevPar) in each of the previous three years. According to data for the T-12 ended March 31, 2021, the hotel achieved the penetration rate of 187.5% for ADR and 179.8% for RevPar.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

The DBRS Morningstar ratings assigned to Classes F, G, and HRR had a variance that was higher than those results implied by the loan-to-value sizing benchmarks from the September 24, 2020, review when market value declines were assumed under the Coronavirus Impact Analysis. The DBRS Morningstar ratings also had variances than those results implied by LTV Sizing Benchmarks considered with this year’s review, when a baseline valuation scenario was used. For additional information on these scenarios, please see the DBRS Morningstar press release dated September 24, 2020 in respect of the subject transaction. Classes F and G carry a Negative trend as DBRS Morningstar continues to monitor the evolving economic impact of coronavirus-induced baseline stress on the transaction. Class HRR does not carry a trend as the class is rated CCC.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is the North American CMBS Surveillance Methodology (March 21, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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 under Related Documents or by contacting us at [email protected].

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

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 696-6293