Morningstar DBRS Finalizes Provisional Credit Ratings on KSL Trust 2025-MAK

DBRS, Inc. (Morningstar DBRS) finalized its provisional credit ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2025-MAK (the Certificates) issued by KSL Trust 2025-MAK:

-- Class A at AAA (sf)
-- Class B at AA (sf)
-- Class C at AA (low) (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 KSL Trust 2025-MAK transaction is collateralized by the borrower's fee-simple interest (and leasehold with respect to certain parcels) in one independent full-service hospitality property and one limited-service hospitality property with a combined 472 keys on Mackinac Island, Michigan. The transaction includes three ground leases with Mackinac Island government agencies for Grand Hotel's golf course through 2044, a borough lot through 2099, and Fort Mackinac Tea Room through 2027. Representing 388 keys of the total 472 keys in the portfolio is Grand Hotel, which is a AAA Four Diamond rated hotel of historical significance as a premier summer destination. Built in 1887 and recognized as a National Historic Landmark, the hotel has been preserved and continues to feature old-world hospitality and charm. Grand Hotel features a wide array of amenities including 15 food and beverage (F&B) outlets, an 18-hole golf course, a fitness center, an outdoor pool, a full-service shop, and retail outlets. The other hotel in the portfolio, representing 84 keys, is Bicycle Street Inn & Suites (Bicycle Inn), which is a limited-service, relatively new hotel off Main Street on Mackinac Island providing excellent accessibility to the ferry terminals; Mackinac Island is accessible only by ferry from St. Ignace and Mackinaw City, Michigan. Mackinac Island is an iconic tourist destination, particularly for the Midwest, which attracts approximately 1 million visitors per year. Mackinac Island provides a unique old-world charm that prohibits motor vehicles, and 80.0% of the island is a state park with extremely high barriers to entry. USA Today rated Mackinac Island as the best summer travel destination in 2023 and 2024, and PeopleForBikes ranked Mackinac Island number one for bicycling in the U.S. also in 2024.

The transaction sponsor is KSL Capital Partners (KSL). KSL is a private equity firm that primarily invests in luxury hotels and resorts. Since inception, KSL has raised more than $25.0 billion and has invested in more than 185 travel and leisure businesses. Both hotels are managed by Davidson Hospitality Group, which is a highly experienced full-service hospitality management company. Prior to the acquisition, the hotels were family-owned. Morningstar DBRS learned on the site tour that, upon acquisition in 2019 for Grand Hotel and 2021 for Bicycle Inn, the sponsor began active revenue management and a dynamic pricing model to set room rates and increase F&B and other revenue spending.

Since acquisition, KSL has invested $106.6 million ($225,795 per key) into the portfolio including $12.8 million invested in early 2025. In line with other hotels on the island, the hotels in this portfolio are seasonal, operating from early May until the end of October each year. The seasonal nature of the hotels allows for capital expenditure (capex) work to take place during the offseason, resulting in minimal disruption to guests' experience. The scope of this investment has been wide ranging from updating all restrooms at Grand Hotel to creating new amenities such as Woodlands Recreation Center and new F&B outlets such as Mackinac Island Pizza Company. The renovation also included the expansion and restoration of the retail corridor and swimming pool. In 2025, approximately $4.0 million was spent on cosmetic improvements and upkeep for Grand Hotel's iconic facade, and an additional $8.8 million is being spent on F&B and retail outlets to grow ancillary income. While the property has seasonal operations, the loan is structured with ongoing monthly deposits of approximately $4.0 million from May to October. On or prior to the first loan payment date, the sponsor will be required to pay a one-time $8.0 million into the seasonal working capital reserve account.

As a result of capex investment and dynamic pricing, the portfolio generated a YE2024 revenue per available room (RevPAR) of $445.06 on a seasonal basis, and $215.82 on an annual basis, which represents a 12.8% increase since 2022. On the back of an impressive 9.6% increase in occupancy, the hotel portfolio's average daily rate (ADR) increased by 1.2% in the same period. Specifically, Grand Hotel's RevPAR experienced an enormous increase of 58.2% from 2019 to 2024, driven by an increase in ADR. From 2022 to 2024, Grand Hotel's RevPAR increased by 10.5%. On an annual basis, the hotel's RevPAR increased by 25.2% from 2019 and by 9.2% from 2022. Per management, the Grand Hotel already had approximately 40,000 rooms booked for the 2025 season.

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 ratings do not address non-payment 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 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 (May 16, 2025): https://dbrs.morningstar.com/research/454196

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.

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, 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 03, 2024)
https://dbrs.morningstar.com/research/444064

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