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

DBRS Limited (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 reflect the collateral's stable performance since issuance, as occupancy, average daily rate (ADR), and revenue per available room (RevPAR) continue to surpass Morningstar DBRS' issuance expectations.

The transaction is collateralized by a mortgage loan secured by The Cosmopolitan, a 3,032-key fully integrated luxury resort and casino on the Las Vegas Strip. The two-year interest-only loan had an initial maturity date of June 2024 followed by three one-year extension options for a fully extended maturity date in June 2027. Each of the extension options is subject to no events of default and the purchase of a new interest rate cap agreement; however, no performance tests are required. The borrower exercised its first extension option extending loan maturity to June 2025. The loan is currently on the servicer's watchlist for upcoming maturity in June 2025 and according to the servicer, the borrower intends to extend the loan.

The property was constructed in 2010, making it one of the newest resorts on the Strip, and has received over $655 million in capital improvements since 2014. The sponsors, BREIT Operating Partnership L.P. and Stonepeak Partners L.P., contributed $1.0 billion of equity alongside the $3.0 billion loan in the acquisition of the property. The sponsors entered a 30-year triple net master lease with MGM Resorts International to operate the property. MGM has guaranteed the payment and performance of all monetary obligations structured in the master lease.

According to September 2024 trailing 12-month (T-12) financials the property reported a net cash flow (NCF) of $359.9 million, compared with $441.1 million at YE2023 and the Morningstar DBRS NCF of $353.1 million derived at issuance. The year-over-year decrease in NCF was largely attributed to decline in other departmental revenue. Morningstar DBRS has requested additional clarity from the servicer as to the reasons for the decline. An STR report was not provided; however, according to the T-12 financials ending September 2024, occupancy, ADR, and RevPAR were reported at 97.5%, $437.21, and $426.47, respectively. Overall, these figures remain relatively consistent with the YE2023 figures and above the Morningstar DBRS figures derived at issuance.

Morningstar DBRS' credit ratings are based on a value analysis from issuance, which considered an NCF of $353.1 million and a capitalization rate of 8.8%, resulting in a Morningstar DBRS value of $4.0 billion and a loan-to-value (LTV) ratio of 75.7% on the mortgage loan. The Morningstar DBRS value represents a variance of -28.7% from the issuance appraised value of $5.6 billion. In addition, Morningstar DBRS maintained positive qualitative adjustments to the LTV-sizing benchmarks totaling 7.75% to reflect the high property quality, strong underlying market fundamentals, and historically stable NCF.

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 Factors in Credit Ratings (August 13, 2024; https://dbrs.morningstar.com/research/437781/morningstar-dbrs-criteria-approach-to-environmental-social-and-governance-factors-in-credit-ratings).

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 (December 13, 2024; https://dbrs.morningstar.com/research/444617/north-american-cmbs-surveillance-methodology).

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
DBRS Tower, 181 University Avenue, Suite 700
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 (December 13, 2024; https://dbrs.morningstar.com/research/444612/north-american-single-assetsingle-borrower-ratings-methodology)

-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024; https://dbrs.morningstar.com/research/439702/morningstar-dbrs-north-american-commercial-real-estate-property-analysis-criteria)

-- Legal Criteria for U.S. Structured Finance (December 03, 2024; https://dbrs.morningstar.com/research/444064/legal-criteria-for-us-structured-finance)

-- North American Commercial Mortgage Servicer Rankings (August 23, 2024; https://dbrs.morningstar.com/research/438283/north-american-commercial-mortgage-servicer-rankings)

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 27, 2023).

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