Morningstar DBRS Assigns Provisional Credit Ratings to COMM 2024-CBM Mortgage Trust

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

-- Class A-1 at (P) AAA (sf)
-- Class A-2 at (P) AAA (sf)
-- Class X-CP at (P) BBB (sf)
-- Class B at (P) AA (low) (sf)
-- Class C at (P) A (low) (sf)
-- Class D at (P) BBB (low) (sf)
-- Class E at (P) BB (low) (sf)
-- Class F at (P) B (low) (sf)

All trends are Stable.

The COMM 2024-CBM Mortgage Trust (COMM 2024-CBM or the Trust) transaction is secured by the borrower's fee-simple and/or leasehold interest in 52 hospitality properties across 25 states, totaling 7,677 keys. The loan will be secured by the borrower's fee-simple interest in six assets, leasehold interest in seven assets, and both fee-simple and leasehold interest in the remaining 39 assets, whereby the land parcels are currently owned by a sister entity to CBM Two Hotels LP. The land owned by CBM Two Hotels LP for these 39 assets will be included as part of the collateral. The portfolio was previously securitized in the COMM 2020-CBM Mortgage Trust (COMM 2020-CBM) transaction, rated by Morningstar DBRS, and there have been no downgrades since issuance.

Since the prior securitization in 2020, the portfolio has seen a value decrease of -7.7% to the current appraised value of $1.10 billion from the previous appraised value of $1.18 billion. Additionally, there has been a -22.4% decrease in the Morningstar DBRS NCF and a -31.1% decrease in the Morningstar DBRS Value since the 2020 securitization. The portfolio's RevPAR performance has rebounded following the coronavirus pandemic to levels slightly above 2019, but the increased expense load has caused NOI to decrease from pre-coronavirus levels.

The sponsor acquired the portfolio (including 18 other hotels--noncollateral) in 2005 for $822.7 million. This purchase price includes the allocable share of the hotel portfolio acquisition in March 2005, the ground lease acquisition in December 2005, redemption of Host Hotels' interest in September 2009, and the acquisition of Marriott's interest in June 2012. The sponsor has since invested $647.2 million into the portfolio (roughly $12.4 million per asset) and has a total cost basis of $1.02 billion. The sponsor has an estimated 92.7% cost to value ratio based on the current appraised value.

All 52 hotels are branded Courtyard by Marriott limited-service hotels managed by Marriott. The properties were built between 1985 and 1990, with a WA vintage of 1988. The sponsor has spent $647.2 million on capital improvements across the portfolio since 2005, with $323.2 million invested since 2019 as part of Marriott's North American brand modernization effort. All properties in the portfolio received, or are currently receiving, an exterior re-imagining and a guest room refresh that is expected to be completed shortly. As of September 2024, approximately nine hotels are still undergoing renovations (0.96% of available room nights).

The sponsor for this transaction is CBM Joint Venture Limited Partnership, a joint venture between Clarion Partners LLC and a large domestic pension fund. Clarion Partners has more than $75.0 billion in assets under management (AUM) and offers a broad range of real estate investment strategies. The sponsor acquired the portfolio beginning in 2005 and currently has a total cost basis of $1.02 billion. The sponsor has successfully refinanced the subject portfolio twice (COMM 2015-LC21 Mortgage Trust and COMM 2020-CBM), including $684 million most recently in 2020. Morningstar DBRS rated the prior COMM 2020-CBM transaction and, as of the date of this report, all payments are current and there have been no bond downgrades since issuance in late 2020.

The whole mortgage loan proceeds of $677.0 million, along with $20.0 million of sponsor equity, will refinance approximately $684.0 million of existing debt and cover remaining closing costs of approximately $13.0 million. The loan is a five-year, fixed-rate IO mortgage loan with an assumed whole-loan coupon of approximately 7.680%. Based on the portfolio appraised value of $1.10 billion, the loan has an LTV of 61.5%. Morningstar DBRS has concluded a value of $678.9 million using a cap rate of 9.50%, resulting in a Morningstar DBRS Whole Loan LTV of 99.7%.

The portfolio has observed a consistent RevPAR trend in recent years, ranging between $89.36 in YE2022 and $97.84 as of the trailing twelve-month period ended September 2024. The subject has consistently outperformed their respective competitive sets. As of the September 2024 TTM, the portfolio has an average RevPAR penetration of 119.4%. Their average NCF growth between 2022 and the September 2024 TTM period is 5.0% and RevPAR has observed an annual growth of 4.7% per year over the same period. The growth has slowed; however, as NCF and RevPAR growth between 2023 and September 2024 TTM was 1.1% and 1.9%, respectively. The Morningstar DBRS NCF results in a DSCR of 1.19x and a debt yield (DY) of 9.9%. The portfolio appears to be achieving a stabilized NCF following the large-scale renovations that is nearly complete and the nationwide hotel disruptions from the coronavirus pandemic. Prior to 2020, the portfolio observed a RevPAR of $94.99 in 2018 and $91.60 in 2019, so the subject has surpassed RevPAR levels observed prior to the large-scale renovations and the coronavirus pandemic. However, the portfolio has seen a -9.6% decline in total NCF between 2019 and the September 2024 TTM, primarily driven by increased expenses. While the NCF has not been able to fully rebound to levels observed in 2019, the portfolio continues to see growth. Additionally, the September 2024 TTM NCF of approximately $67.9 million sufficiently covers the whole loan's debt service of $44.6 million by approximately $23.3 million.

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/or 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, the credit ratings do not address Prepayment Charges.

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 Factors in Credit Ratings (August 13, 2024) at https://dbrs.morningstar.com/research/437781.

Class X-CP is an interest-only (IO) certificate that references a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

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 (September 19, 2024), https://dbrs.morningstar.com/research/439699.

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.

-- Legal Criteria for U.S. Structured Finance (October 28, 2024), https://dbrs.morningstar.com/research/441840
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702
-- Rating North American CMBS Interest-Only Certificates (June 28, 2024) https://dbrs.morningstar.com/research/435294

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