Morningstar DBRS Confirms Credit Ratings on All Classes of Hilton USA Trust 2016-HHV

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2016-HHV issued by Hilton USA Trust 2016-HHV as follows:

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

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the collateral, as evidenced by the collateral's revenue per available room (RevPAR) and average daily rate (ADR) figures, which remain in line with Morningstar DBRS' expectations. In light of upcoming maturity, Morningstar DBRS re-evaluated its net cash flow (NCF) to assess the durability of the credit ratings and considered a stressed scenario by applying a haircut to the in-place NCF, the results of which supported the credit rating confirmations with this review.

The transaction is secured by the borrower's fee-simple interest in the Hilton Hawaiian Village, a trophy-quality, full-service luxury beachfront resort in Waikiki, Hawaii. The collateral consists of five guest towers comprising 2,860 rooms, plus conference space for up to 2,600 attendees. The resort has the longest stretch of beach and the largest amount of meeting space among its competitors. Additionally, the property benefits from the wide range of amenities, including over 65,000 square feet of indoor meeting space, three restaurants, four lounges, five outdoor pools, and fitness centers.

The collateral is a $750.0 million pari passu participation interest in a $1.3 billion whole loan, set to mature in November 2026. The loan is sponsored by Park Intermediate Holdings LLC, a wholly owned subsidiary of Park Hotels & Resorts, one of the largest publicly traded real estate investment trusts in the U.S. hospitality industry. According to a Pacific Business News article, published on May 5, 2025, the sponsor is currently working on renovating the resort to increase the room capacity and upgrade existing rooms, based on an estimated budget of $83.0 million. The first phase of the renovation, which utilized $41 million of the budget, was completed in February 2025, adding 12 more keys to the resort and upgrading approximately half of the Rainbow Tower's guest rooms. For the second phase of the renovation that is scheduled to be completed by Q3 2025, the sponsor is expecting to complete the renovation of the Tower's remaining rooms and add another 14 keys to the room inventory.

According to year-end (YE) 2024 financial reporting, the collateral reported a NCF of $144.8 million (resulting in a debt service coverage ratio (DSCR) of 2.66x), a decline from YE2023 figure of $170.9 million (DSCR of 3.15x), but exceeding the Morningstar DBRS NCF of $126.6 million (DSCR of 2.33x), which was derived as part of the June 2023 review, and the issuer's underwritten NCF of $132.6 million (DSCR of 2.44x). Per the January 2025 STR report, the collateral's occupancy rate, ADR, and RevPAR for the trailing 12-month period through December 31, 2024, were 84.1%, $304, and $256, respectively, below the YE2023 figures of 90.8%, $302, and $275, respectively. Despite the year-over-year cash flow decline, performance remains in line with Morningstar DBRS' expectations. The property is expected to benefit from the completion of the ongoing capital improvements and will continue to benefit from its prime location and superior property quality.

In the analysis for this review, given the loan's upcoming maturity in November 2026 and to test the durability of the credit ratings, Morningstar DBRS analyzed the cash flow under both a base case and stressed scenario, with an 8.0% capitalization rate applied. The base case scenario, which is based on a standard surveillance haircut to the YE2024 NCF, results in a base-case Morningstar DBRS value of $1.8 billion (loan-to-value ratio (LTV) of 71.9%). In the stressed scenario, which included a 20% haircut to the YE2024 NCF, Morningstar DBRS derived a stressed value of $1.5 billion, resulting in an LTV of 88.0%. Morningstar DBRS maintained qualitative adjustments of 4.5% to the LTV sizing benchmarks to reflect the property's prime location within a strong market, stable performance, and high property quality.

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 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): https://dbrs.morningstar.com/research/437781.

Classes X-A and X-B are interest-only (IO) certificates that reference 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 CMBS Surveillance Methodology (February 28, 2025): https://dbrs.morningstar.com/research/448963.

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.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

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

-- 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.

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

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at (July 17, 2023): https://dbrs.morningstar.com/research/417279.

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