Morningstar DBRS Confirms All Credit Ratings of GS Mortgage Securities Corporation Trust 2023-FUN

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2023-FUN issued by GS Mortgage Securities Corporation Trust 2023-FUN as follows:

-- Class A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (high) (sf)
-- Class D at A (sf)
-- Class HRR at A (low) (sf)

All trends are Stable.

The ratings actions reflect the stable credit outlook given performance remains inline with issuance expectations. In the relatively short time since closing, the collateral portfolio has exhibited strong performance metrics with increases in occupancy and cash flow over both the Morningstar DBRS and the issuer’s figures as of the most recent reporting. The transaction is secured by the fee-simple interest in Kalahari Resorts Pocono Manor, a 977-key waterpark resort in Pocono Manor, Pennsylvania. The resort was originally built in 2015 totalling 457 keys, and the sponsor subsequently invested approximately $228.1 million, or $233,469 per key, in capital improvements between two expansions in 2017 and 2019, bringing the subject to its current room count and extending the waterpark and convention center. Currently, the property boasts a 220,000 square-foot (sf) indoor waterpark an approximately 90,000 sf outdoor waterpark, 16 food and beverage outlets, more than 91,500 sf of indoor/outdoor event space, a spa, and a fitness center. The transaction is sponsored by Kalahari Resorts & Conventions, who own and operate 2,662 resort keys, with another location expected to open in 2026.

The $350.0 million loan was used to refinance $328.1 million of existing debt and return $14.5 million of equity to the sponsor. The two-year floating-rate loan pays interest-only (IO) with three additional one-year extension options for a fully extended maturity date of March 2028.

According to the most recent financials, the subject reported a trailing 12-month (T-12) net cash flow (NCF) for the period ended June 30, 2023 of $98.8 million as compared to Morningstar DBRS NCF of $62.9 million. In addition, the September 2023 STR reported an occupancy, average daily rate (ADR), and revenue per available room (RevPAR) of 72.0%, $382.82, and $275.61 for the T-12 period ended September 2023, with a RevPAR penetration rate of $113.8%. The Pocono Mountains are well known as a leisure-oriented location, serving the tri state area and as such, there is some concentration of competing properties. As the subject is the largest and newest such construction in the area, stable demand over the near to moderate term is expected to be sustained. However, it is noteworthy that one competing property in the Great Wolf Lodge Poconos recently completed an expansion and another competing property recently opened in the Great Wolf Lodge Perryville. In addition, the market will be supplemented by another option with the completion of construction at Great Wolf Lodge Mashantucket, which is expected to deliver sometime in 2025. Although these could ultimately impact demand at the subject, the significant delta between the in-place NCF and the Morningstar DBRS NCF provides significant cushion against potential cash flow disruptions.

At issuance, Morningstar DBRS derived a value of $627.4 million based on the Morningstar DBRS NCF of $62.9 million and a capitalization rate of 10.0%, resulting in a Morningstar DBRS Loan-to-Value Ratio (LTV) of 55.8% compared with the LTV of 47.4% based on the appraised value of $739.0 million at issuance. Positive qualitative adjustments totalling 3.0% were applied to the LTV Sizing Benchmarks to reflect low cash flow volatility given the multiple revenues streams the resort offers, above average property quality resulting from recent construction and renovations, and stable demand for the property type within the market.

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 Risk Factors in Credit Ratings (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 the North American CMBS Surveillance Methodology (March 16, 2023; https://dbrs.morningstar.com/research/410912).

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.

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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 (October 19, 2023; https://dbrs.morningstar.com/research/422174)

Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023; https://dbrs.morningstar.com/research/415687)

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 22, 2023; https://dbrs.morningstar.com/research/420982)

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

Legal Criteria for U.S. Structured Finance (December 7, 2023; https://dbrs.morningstar.com/research/425081)

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.

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