Morningstar DBRS Finalizes Provisional Credit Ratings on Hawaii Hotel Trust 2025-MAUI

DBRS, Inc. (Morningstar DBRS) finalized its provisional credit ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2025-MAUI (the Certificates) issued by Hawaii Hotel Trust 2025-MAUI (the Issuer):
-- Class A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (high) (sf)
-- Class JRR at B (sf)
-- Class KRR at B (sf)

All trends are Stable.

This transaction is secured by the borrower's fee-simple interest in the Four Seasons Resort Maui at Wailea (Four Seasons Maui). The full-service luxury hotel features 383 guest rooms, with five food and beverage offerings, specialty retail outlets, and meeting space. The hotel operates under the Four Seasons flag via an agreement that expires in February 2040 and benefits from its luxury quality, strong brand affiliation, and a wide range of amenities, including a spa, three outdoor pools, tennis courts, a game room and fitness center, and preferred access to the 54-hole Wailea Golf Club directly across Wailea Alanui Drive from the hotel. The Four Seasons Maui has been acknowledged as a AAA Five Diamond Hotel since its opening in 1990 and has earned the prestigious Forbes Travel Guide Five Star award since 2005. Wailea has one of the highest barriers to entry of any resort market in the world. Available sites are extremely rare or nonexistent, and zoning is complex and protective. Morningstar DBRS has a positive view on the subject considering the excellent quality of the collateral, its prime beachfront location in a market with extremely high barriers to entry, and the significant capital invested into the property with continued near-term investment.

The mortgage loan of $665 million will be used to retire $650 million of existing debt and cover $15 million of closing costs, which include costs associated with the purchase of the term Secured Overnight Financing Rate (SOFR) cap. The loan is a two-year floating-rate interest-only mortgage loan with three one-year extension options. The floating rate will be based on the one-month SOFR plus the initial weighted-average component spread, which is expected to be approximately 2.267369165%. The borrower will be required to enter into an interest rate cap agreement, with an expected one-month term SOFR strike price of 3.25% during the initial term. The subject was previously securitized in the Morningstar DBRS-rated HHT 2019-MAUI transaction, whose debt will be refinanced as a result of this transaction.

The Borrower is a special purpose entity controlled by and indirectly over 90% owned by MSD Hospitality Partners, L.P. (the "Borrower Sponsor" or the "Guarantor"), which is the non-recourse carveout guarantor. The remaining ownership interest of the Borrower is owned by affiliates of MSD Capital, L.P. The Borrower Sponsor is controlled by MSD Partners (GP), LLC, an affiliate of BDT & MSD Holdings, L.P. ("BDT & MSD") and the general partner of MSD Partners, L.P. and MSD Real Estate Partners, L.P. (collectively, "MSD Partners"). BDT & MSD is a merchant bank with an advisory and investment platform built to serve the distinct needs of business owners and strategic, long-term investors. Its funds are managed by its affiliated investment advisers, BDT Capital Partners, LLC ("BDT Capital Partners") and MSD Partners. MSD Partners has invested in or manages approximately $16 billion of real estate equity and credit, including other luxury hotels. The property is flagged as a Four Seasons hotel, a privately-owned hotel management company that has been managing the resort since its inception in 1990. The management agreement expires in 2040 and has one 15-year renewal option remaining for a fully extended maturity date of 2055.

The subject benefits from its location in Maui, which is the second-largest of the Hawaiian Islands. Maui experienced significant disruption in travel because of the coronavirus pandemic and the August 2023 wildfires. In the immediate aftermath of the wildfires, travel to Maui was severely restricted, with nearly all incoming flights to the island directed toward the recovery effort for the affected areas, which were predominantly concentrated in and around Lahaina. However, Maui's recovery following the coronavirus pandemic and the wildfires is evidenced by the island's strong visitor demand and improved airlift numbers. Maui has a strong base in tourism and is consistently ranked as one of the top island destinations globally. The subject attracts visitors from all around the world because of its excellent amenities and accommodations and is known as one of the most luxurious hotels and resorts in the U.S. There is limited competition and little in the way of new construction or development for a similar product in the area.

The subject is a consistent outperformer within its competitive set, boasting average occupancy, average daily rate (ADR), and revenue per available room (RevPAR) penetration rates of 105.6%, 159.4%, and 169.2%, respectively, from 2005 through January 2025. In 2019, prior to the coronavirus pandemic, the subject reported an 85.2% occupancy rate and a $1,046.85 ADR for a RevPAR of $892.18. While occupancy declined, the sponsor was successful in recovering ADR and RevPAR to above their prepandemic levels prior to the onset of the wildfires. The property achieved a RevPAR of $1,176.17 as of YE2022, after the pandemic-affected RevPAR low of $266.14 in 2020. The property's top-line performance for the T-12 ended January 2025 is 6.2% above prepandemic levels but 17.2% lower than the YE2022 levels. Forward bookings for the subject are strong, despite the borrower's ongoing capital improvement plan. PACE bookings as of February 18, 2025, show total room nights on-the-books levels at approximately 109.7% and 110.4%, respectively, of room night levels from the same period in 2024 and in 2023. The increase is primarily driven by transient demand, which is a further testament to Maui and the subject's continued wildfire recovery. Morningstar DBRS' concluded stabilized RevPAR of $988.79 is 10.8% and 2.0% above the 2019 and T-12 levels, respectively. The subject's location, market positioning, experienced sponsorship, and the property's recent and continued renovations should allow for continued growth. Morningstar DBRS believes that the subject will remain a leader within the luxury hotel and resort market in Maui.

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, the credit ratings do not address Spread 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 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.

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 (February 28, 2025) https://dbrs.morningstar.com/research/448962.

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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS, Inc.
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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, 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
-- Legal Criteria for U.S. Structured Finance (December 3, 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.