Morningstar DBRS Confirms Credit Ratings on All Classes of BX Commercial Mortgage Trust 2022-CSMO

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2022-CSMO issued by BX Commercial Mortgage Trust 2022-CSMO:

-- 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 BB (sf)

All trends are Stable.

The credit rating confirmations and Stable trends reflect the continued stable performance of the collateral hotel, which recently reported updated performance metrics showing net cash flow (NCF), occupancy, average daily rate (ADR), and revenue per available room (RevPAR) figures above Morningstar DBRS’ expectations at issuance. The transaction is collateralized by a mortgage loan secured by the Cosmopolitan Las Vegas Resort & Casino, a 3,032-key hotel with approximately 110,000 square feet of casino space, located on the Las Vegas Strip. The two-year floating-rate loan pays interest-only and has three one-year extension options, with a fully extended maturity date in June 2027. Each of the extension options is subject to no events of default and the purchase of an interest rate cap. The loan is currently on the servicer’s watchlist for upcoming initial maturity in June 2024. According to the most recent servicer commentary, the borrower has yet to indicate whether they will exercise their first option; however, given the experienced sponsorship and continued stable performance of the collateral, Morningstar DBRS expects the loan will be extended or takeout financing will be secured.

The $3.0 billion loan, along with $1.0 billion of sponsor equity, funded the acquisition of the collateral by a joint venture 80.0% indirectly owned by BREIT Operating Partnership L.P., a Blackstone Fund Entity, and 20.0% owned by Stonepeak Partners LP. The borrower entered into a 30-year triple-net master/operating lease with three 10-year renewal options with a wholly owned subsidiary of MGM Resorts International (MGM). The lease payments will be fully guaranteed by MGM.

The subject has maintained healthy performance metrics that remain above issuance expectations. According to the September 2023 trailing 12-month (T-12) financials, the loan reported an NCF of $459.2 million, compared with $462.9 million at YE2022 and a Morningstar DBRS NCF of $353.1 million derived at issuance. While departmental revenue increased in 2023, the decline in NCF when compared with YE2022 figures was a result of increases in operating expenses, driven primarily by a 24.8% increase in repairs and maintenance expenses. The September 2023 T-12 financials reported an occupancy rate, ADR, and RevPAR of 98.1%, $403.72, and $395.88, respectively. While these figures are slightly below the YE2022 figures, performance continues to compare well with the Morningstar DBRS stabilized figures derived at issuance.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (January 23, 2024; https://dbrs.morningstar.com/research/427030)

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

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

The principal methodology is North American CMBS Surveillance Methodology (March 1, 2024; https://dbrs.morningstar.com/research/428798)

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating was initiated at the request of the rated entity.
The rated entity or its related entities did participate in the credit rating process for this credit rating action.
Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.
This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- North American Single-Asset/Single-Borrower Ratings Methodology (March 1, 2024; https://dbrs.morningstar.com/research/428799)
-- Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024; https://dbrs.morningstar.com/research/428623)
-- DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 22, 2023; https://dbrs.morningstar.com/research/420982)
-- North American Commercial Mortgage Servicer Rankings (August 23, 2023; https://dbrs.morningstar.com/research/419592)
-- Legal Criteria for U.S. Structured Finance (December 7, 2023;
https://dbrs.morningstar.com/research/425081)

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279.

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