Morningstar DBRS Confirms Credit Ratings on All Classes of Great Wolf Trust 2024-WOLF

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2024-WOLF issued by Great Wolf Trust 2024-WOLF as follows:

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

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the transaction, which closed in March 2024.

The transaction is collateralized by the borrower's fee and/or leasehold interests in eight Great Wolf Lodge resorts, totaling 3,044 keys, 461,521 square feet (sf) of indoor water park space, and 60,459 sf of meeting space across seven states. The properties are generally in drive-to locations from major metropolitan areas, which provide the demand base for these leisure-oriented assets. In addition, the properties benefit from a range of amenities, with a combination of indoor waterpark, lodging, and dining options, along with additional exclusive attractions. The sponsor has invested approximately $94.3 million, or $30,985 per key toward capital improvements across the portfolio since 2020, excluding construction costs for the two new assets in Manteca, California, and Scottsdale, Arizona. 

Whole-loan proceeds of $1.0 billion and sponsor equity of approximately $9.6 million was used to repay circa $702.0 million of existing debt and $287.6 million of construction debt for the Manteca and Scottsdale assets in addition to funding closing costs. The interest-only loan is structured with an initial two-year term and three one-year extension options. The transaction allows for the release of properties from the portfolio subject to a release price of 105% of the allocated loan amount for the initial 30% of the total balance and a release price of 110% of the allocated loan amount for the remaining 70% of the total balance. As part of this transaction, the borrower had to obtain an interest rate cap agreement that was the lower of 5.50% or a strike rate that resulted in a minimum debt service coverage ratio (DSCR) of 1.10 times (x).

According to the financial reporting for the trailing twelve (T-12) month period ended September 30, 2024, the portfolio generated $120.1 million of net cash flow (NCF), resulting in a DSCR of 1.41x, compared with the issuer's underwritten figure and Morningstar DBRS' figure of $129.5 million (a DSCR of 1.51x) and $106.3 million (a DSCR of 1.20x), respectively. Per the September 2024 STR report, the portfolio's reported weighted average (WA) occupancy rate, average daily rate, and revenue per available room (RevPAR) metrics were 79.8%, $258.0, and $206.1, respectively, compared with 81.5%, $266.4, and $217.1 as of YE2023. Morningstar DBRS believes that the strong 2023 performance is at least partially the result of a higher transient proportion in the hotel sector resulting from pent-up demand after pandemic-related restrictions and, as such, Morningstar DBRS expected room rates to normalize. At issuance, Morningstar DBRS concluded to a stabilized RevPAR figure of $207.65. The portfolio continues to outperform its competitive set with a WA RevPAR penetration rate of 180.4% per the September 2024 STR report.

At issuance, Morningstar DBRS derived a value of $1.1 billion based on a capitalization rate of 9.93% and the Morningstar DBRS NCF noted above. The Morningstar DBRS value represents a -26.4% variance from the issuance appraised value of $1.5 billion. The resulting Morningstar DBRS loan-to-value ratio (LTV) was 93.4% compared with the LTV of 68.7% based on the appraised value at issuance. Morningstar DBRS maintained positive qualitative adjustments totaling 4.25% to reflect the portfolio's generally low cash flow volatility, good property quality, and strong market fundamentals. Overall, Morningstar DBRS has a favorable outlook on the portfolio throughout the five-year fully extended term given the property's experienced management and sponsor's continued capex commitment.

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

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.

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 (December 13, 2024), https://dbrs.morningstar.com/research/444612

-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702

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

-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283

-- Legal Criteria for U.S. Structured Finance (December 03, 2024), https://dbrs.morningstar.com/research/444064

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