Morningstar DBRS Confirms Credit Ratings on All Classes of LUXE Trust 2021-TRIP

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2021-TRIP issued by LUXE Trust 2021-TRIP as follows:

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

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the underlying collateral, as evidenced by the growth in weighted average (WA) occupancy rates, average daily rate (ADR), and revenue per available room (RevPAR) figures since issuance. The loan has been added to the servicer's watchlist ahead of its upcoming maturity in October 2024, and per the most recent servicer commentary, the borrower is expected to pay off the loan in full at that time and is not expected to exercise its last two remaining extensions options.

At issuance, the $1.8 billion floating-rate, interest-only loan was collateralized by the fee-simple and/or leasehold interest in a portfolio of nine luxury hospitality properties, totaling 3,269 rooms, located across five states. The hotels were distributed among four different flags, namely the Four Seasons, Fairmont, Loews, and Marriott (Ritz-Carlton). Since issuance, three of the original nine properties have been successfully released from the pool: the Four Seasons Jackson Hole (released in November 2022), the Four Seasons Scottsdale Troon North (released in December 2022), and Loews Santa Monica (release in February 2023). The current pool balance is $1.1 billion, representing a collateral reduction of $685.7 million or 38.1% since issuance. Property releases are permitted but subject to a release premium of 110% for the first 25% of the collateral, followed by 115% until a 50% collateral reduction is reached, and 120% thereafter, based on the allocated loan amount (ALA). Furthermore, immediately prior to the release the property, the debt yield must equal or be greater than 5.5%. The sponsor is an affiliate of Strategic Hotels and Resorts, which was acquired by AB Stable VII, LLC and is an indirect subsidiary of Anbang Insurance Group Co., Ltd., the owner of the borrowers.

The remaining collateral consists of six hotels totalling 2,558 rooms across Arizona, California, Illinois, and Texas. Four of the six properties have reported improved performance since issuance, while two properties slightly lag issuance expectations. The YE2023 reported net cash flow (NCF) for the remaining assets was $114.0 million, which remains in line with Morningstar DBRS' concluded NCF of $106.8 million at issuance for those same properties. According to the STR report for the trailing 12-month period (T-12) ended December 31, 2024, the WA occupancy rate, ADR, and RevPAR for the remaining six properties were reported at 61%, $548, and $333, respectively, representing a WA RevPAR penetration rate of 118%. For those same properties, the Morningstar DBRS WA figures from issuance were 67%, $416, and $280, respectively, illustrating a marked increase in ADR and RevPAR over issuance expectations.

At last review, given the property releases, Morningstar DBRS updated the loan-to-value ratio (LTV) sizing in its analysis to reflect both the impact of that paydown and the ability of the ratings to withstand fluctuations in property value over the remainder of the term. Morningstar DBRS derived a stressed value of $1.15 billion using an NCF of $86.7 million and a capitalization rate of 7.5%. The implied Morningstar DBRS LTV for the stressed scenario is 96.8%. This updated value represented a -41.3% variance from the issuance appraised value of $1.96 billion, reflecting the property releases. Morningstar DBRS maintained the positive qualitative adjustments totalling 5.75% to account for the historically strong performance, property quality, and market fundamentals.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

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 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 at (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 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 info-DBRS@morningstar.com.

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 Limited
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Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

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 (July 11, 2024; https://dbrs.morningstar.com/research/436004)

Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024; https://dbrs.morningstar.com/research/428623)

Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (June 28, 2024; https://dbrs.morningstar.com/research/435293)

North American Commercial Mortgage Servicer Rankings (August 23, 2023; https://dbrs.morningstar.com/research/419592)

Legal Criteria for U.S. Structured Finance (April 15, 2024; https://dbrs.morningstar.com/research/431205/legal-criteria-for-us-structured-finance)

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 (July 17, 2023).

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