Morningstar DBRS Assigns Provisional Credit Ratings to CALI Commercial Mortgage Trust 2024-SUN

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2024-SUN (the Certificates) to be issued by CALI Commercial Mortgage Trust 2024-SUN (the Trust):

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

All trends are Stable.

The collateral for CALI Commercial Mortgage Trust 2024-SUN Transaction includes the borrower's fee-simple interest in the Shutters on the Beach (Shutters) and Hotel Casa del Mar (Casa) properties, encompassing 327 keys. The two luxury hotel and resort properties are well located and are the only offerings in Los Angeles County, with direct frontage on the Pacific Ocean. The properties offer guests lavish amenities, panoramic views, upscale shopping, fine dining, nightlife, and direct beach access. Morningstar DBRS has a positive view of the portfolio considering the excellent quality of the collateral, prime beachfront location of the collateral, and the commitment and experience of the Sponsor, Edward and Thomas Slatkin, in the West Los Angeles market.

The portfolio benefits from its strong base in tourism, excellent beachfront locations on Ocean Avenue; close proximity to major demand drivers, including the Santa Monica Pier, Santa Monica Place, Class A office space, and the Third Street Promenade; and its proximity to I-10, which provides convenient access to Los Angeles. The collateral properties attract visitors from around the world as a result of their excellent amenities, accommodation, and reputation as two of the most luxurious hotels and resorts in the world.

Each of the iconic hotels has its own distinct personality, which allows them to complement, rather than compete, with each other. The properties' restaurants and bar/lounge areas draw significant demand from the Los Angeles area, and the Sponsor estimates that 80% of patrons are not guests of the collateral hotels. The properties also benefit from municipal building restrictions established in 1990 that preclude the development of any new hotels along the Santa Monica coastline, affording Shutters on the Beach and Casa del Mar, the only two oceanfront properties in the market, a competitive advantage within Santa Monica as well as the greater Los Angeles luxury hotel market. Both Shutters and Casa have received considerable investment and have displayed strong performances compared with the luxury segment of the Los Angeles hotel market since the financing of these properties was first securitized in 2014. The collateral for the loan was securitized in CSMC 2014-SURF, CSMC 2015-SAND, and again in the Morningstar DBRS-rated MSC 2018-SUN transaction. Since the securitization in 2018, the Sponsor reported renovations at each hotel totaling $12.5 million ($62,890 per room) at Shutters and $9.8 million at Casa ($75,584 per room).

Since opening in 1993, Shutters has been recognized as the premier luxury coastal destination in the entire Los Angeles area. The hotel was designed to capture the essence of a laid-back Southern California lifestyle yet be reminiscent of early 1900s beach cottages with a Cape Cod-style facade. Shutters offers 198 guest rooms (including 12 suites), two award-winning restaurants (now with two new outdoor dining patios at both Coast and Pico restaurants), more than 17,800 sf of event space with additional square footage available for private buyouts, a spa, a heated outdoor pool, and on-site surface parking. More than 41% of the rooms at Shutters have direct or partial ocean views.

Casa was introduced in 1999 following the $60 million renovation of a historic Santa Monica beach club. With a highly attractive Mediterranean-inspired design, Casa offers 129 elegantly appointed guest rooms (including 17 suites), more than 15,200 sf of event space with additional square footage available for private buyouts, an expansive beachfront pool deck, a bar area known as the Terrazza Lounge, and Patio del Mar, a brand-new seafood restaurant on the sand. More than 57% of the rooms at Casa have direct or partial ocean views.

Morningstar DBRS' credit rating on the Certificates addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related Principal Distribution Amounts and Interest Distribution Amounts for the rated classes.

Morningstar DBRS' credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, Yield Maintenance Premiums.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) 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 Single-Asset/Single-Borrower Ratings Methodology (March 1, 2024), https://dbrs.morningstar.com/research/428799.

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

With regard to due diligence services, Morningstar DBRS was provided with the Form ABS Due Diligence-15E (Form-15E), which contains a description of the information that a third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While due diligence services outlined in Form-15E do not constitute part of Morningstar DBRS' methodology, Morningstar DBRS used the data file outlined in the independent accountant's report in its analysis to determine the credit ratings referenced herein.

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.

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of final credit ratings on the above-mentioned securities is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

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 Commercial Mortgage Servicer Rankings (August 23, 2023), https://dbrs.morningstar.com/research/419592
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (June 28, 2024), https://dbrs.morningstar.com/research/435293
-- Legal Criteria for U.S. Structured Finance (April 15, 2024), https://dbrs.morningstar.com/research/431205

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.