DBRS Assigns Provisional Ratings to Benchmark 2018-B6 Mortgage Trust

DBRS, Inc. (DBRS) assigned provisional ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2018-B6 to be issued by Benchmark 2018-B6:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (sf)
-- Class X-B at A (high) (sf)
-- Class C at A (sf)
-- Class D at BBB (high) (sf)
-- Class X-D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F-RR at BB (high) (sf)
-- Class G-RR at BB (sf)
-- Class J-RR at B (sf)

Classes X-D, D, E-RR, F-RR, G-RR, NR-RR, VRR, S and R will be privately placed. The X-A, X-B, and X-D balances are notional.

All trends are Stable.

The collateral consists of 55 fixed-rate loans, secured by 248 commercial and multifamily properties. The transaction is a sequential-pay pass-through structure. The conduit pool was analyzed to determine the provisional ratings, reflecting the long-term probability of loan default within the term and its liquidity at maturity. Trust assets contributed from six loans, representing 32.4% of the pool, are shadow-rated investment grade by DBRS. Proceeds for the shadow-rated loans are floored at their respective rating within the pool. When the combined 32.4% of the pool has no proceeds assigned below the rating floor, the resulting pool subordination is diluted or reduced below that rated floor. When the cut-off loan balances were measured against the DBRS Stabilized net cash flow and their respective actual constants, five loans, representing 4.1% of the total pool, had a DBRS Term debt service coverage ratio (DSCR) below 1.15 times (x), a threshold indicative of a higher likelihood of mid-term default. Additionally, to assess refinance risk given the current low-interest-rate environment, DBRS applied its refinance constants to the balloon amounts. This resulted in 28 loans, representing 59.5% of the pool, having whole loan refinance DSCRs below 1.00x and 19 loans, representing 44.1% of the pool, having whole loan refinance DSCRs below 0.90x. Aventura Mall, Workspace and TriBeCa House Conduit, which represent 15.7% of the transaction balance and are three of the pool’s loans with a DBRS Refi DSCR below 0.90x, are shadow-rated investment grade by DBRS and have a large piece of subordinate mortgage debt outside the trust.

Six loans – Aventura Mall, Moffett Towers II, West Coast Albertsons Portfolio, 636 11th Avenue, Workspace and TriBeCa House Conduit – representing a combined 30.1% of the pool, exhibit credit characteristics consistent with investment-grade shadow ratings. Aventura Mall exhibits credit characteristics consistent with a BBB (high) shadow rating, Moffett Towers II exhibits credit characteristics consistent with a BBB shadow rating, West Coast Albertsons Portfolio exhibits credit characteristics consistent with an A (high) shadow rating, 636 11th Avenue exhibits credit characteristics consistent with a BBB (low) shadow rating, Workspace exhibits credit characteristics consistent with an AA (low) shadow rating and TriBeCa House Conduit exhibits credit characteristics consistent with an BBB (high)shadow rating. Nine loans, representing 26.4% of the pool, are located in urban and super-dense urban gateway markets with increased liquidity that benefit from consistent investor demand, even in times of stress. Urban markets represented in the deal include Chicago, San Francisco and New York City. Furthermore, there is limited rural and tertiary concentration with only eight loans, representing 6.7% of the pool.

Nine loans, representing 24.7% of the transaction balance, are secured by properties that are either fully or primarily leased to a single tenant. This includes four of the largest 15 loans: Moffett Towers II, West Coast Albertsons Portfolio, 636 11th Avenue and 1800 Vine Street. Loans secured by properties occupied by single tenants have been found to suffer higher loss severities in an event of default.

The deal is concentrated by property type, with 20 loans, representing 48.4% of the pool, secured by office properties. Of the office property concentration, 30.5% of the loans are located in urban and super dense urban markets and no loan secured by an office property is located in a tertiary or rural market. Two of these loans – Moffett Towers II and Workspace – representing 20.9% of the office concentration and 10.1% of the total pool balance, are shadow-rated investment grade by DBRS.

The transaction’s weighted-average (WA) DBRS Refi DSCR is 0.90x, indicating higher refinance risk on an overall pool level. In addition, 28 loans, representing 59.5% of the pool, have DBRS Refi DSCRs below 1.00x, including seven of the top ten loans and ten of the top 15 loans. Nineteen of these loans, comprising 44.1% of the pool, have DBRS Refi DSCRs less than 0.90x, including five of the top ten loans and eight of the top 15 loans. These credit metrics are based on whole-loan balances. When measured against A-note balances only, the pool WA DBRS Refi DSCR rises significantly to 0.99x. Three of the pool’s loans with a DBRS Refi DSCR below 0.90x – Aventura Mall, Workspace and TriBeCa House Conduit – which represent 15.7% of the transaction balance, are shadow-rated investment grade by DBRS and have large pieces of subordinate mortgage debt outside the trust. The pool’s DBRS Refi DSCRs for these loans are based on a WA stressed refinance constant of 9.76%, which implies an interest rate of 9.12%, amortizing on a 30-year schedule. This represents a significant stress of 4.48% over the WA contractual interest rate of the loans in the pool.

Classes X-A, X-B and X-D are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated reference tranche adjusted upward by one notch if senior in the waterfall.

The rating assigned to Class J-RR materially deviates from the higher rating implied by the quantitative results. DBRS considers a material deviation to be a rating differential of three or more notches between the assigned rating and the rating implied by the quantitative result that is a substantial component of a rating methodology; in this case, the assigned rating reflects the uncertain loan-level event risk.

All ratings will be subject to ongoing surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

For more information on this transaction and supporting data, please log into www.viewpoint.dbrs.com. DBRS will continue to monitor this transaction with periodic updates provided in the DBRS Viewpoint platform.

This press release was amended on October 9, 2018, to state that the rating assigned to Class J-RR materially deviated from the higher rating implied by the quantitative results.

Notes:
With regard to due diligence services, DBRS was provided with the Form ABS Due Diligence-15E (Form-15E), which contains the description of the information that the third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While DBRS did not require due diligence services outlined in Form-15E, DBRS did use the Data File outlined in the Independent Accountant’s Report in its analysis to determine the ratings.

The principal methodology is North American CMBS Multi-borrower Rating Methodology, which can be found on dbrs.com under Methodologies. For a list of the Structured Finance related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document on www.dbrs.com. Please note that not every related methodology listed under a principal Structured Finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrs.com.