DBRS Morningstar Confirms Ratings on Benchmark 2018-B5 Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed the ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2018-B5 issued by Benchmark 2018-B5 Mortgage Trust as follows:

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

All trends are Stable.

Classes E-RR, F-RR, and G-RR were removed from Under Review with Negative Implications, where they were placed on August 6, 2020.

As of the December 2020 remittance, all 57 original loans remain in the pool. There are 16 loans, representing 22.3% of the current trust balance, on the servicer’s watchlist. Additionally, there are two loans, representing 6.7% of the pool, in special servicing. DBRS Morningstar is monitoring these loans for performance declines that have generally been driven by disruptions related to the Coronavirus Disease (COVID-19) pandemic. As of the December 2020 reporting, there was one loan, representing 0.4% of the pool, showing 60 days delinquent, but as of the date of the remittance report it remained with the master servicer.

DBRS Morningstar notes the transaction has a high concentration of retail property types, with 16 loans secured by regional malls and both anchored and unanchored retail properties, collectively representing 32.9% of the pool. In addition, the pool has a moderate concentration of hospitality properties, representing 15.9%. Hospitality properties have been the most severely affected by the initial effects of the coronavirus pandemic; as such, this concentration, while relatively moderate, suggests increased risks for the pool since issuance, particularly for the lower rating categories.

Eight of the loans on the watchlist (16.3% of the pool) are secured by lodging properties, and two loans are secured by retail properties (0.8% of the pool). Two of the loans backed by hospitality properties have been flagged for coronavirus relief requests, with those borrowers typically seeking temporary payment relief. Although the need for relief is generally indicative of increased risks from issuance, along with the pandemic-related stress on hospitality properties across the country that is undoubtedly affecting the collateral hotels in this pool, DBRS Morningstar noted the historically stable performance of the underlying hotels and the lack of delinquency as stabilizing factors for this review.

At issuance, five loans, representing 27.9% of the current pool balance, were shadow-rated as investment grade. These loans include Aventura Mall (Prospectus ID#1; 10.0% of the pool), eBay North First Commons (Prospectus ID#4; 5.0% of the pool), Workspace (Prospectus ID#3; 4.9% of the pool), Aon Center (Prospectus ID#7; 4.2% of the pool), and 181 Fremont Street (Prospectus ID#8; 3.9% of the pool). With this review, DBRS Morningstar confirms that the performance of these loans remains consistent with investment-grade loan characteristics.

The largest loan in special servicing, NY & CT NNN Portfolio (Prospectus ID#2; 5.6% of the pool), is secured by the borrower’s fee interest in a cross-collateralized portfolio of nine retail properties totalling 70,333 square feet across the greater New York metro area. Overall, the portfolio is composed of five unanchored single-tenant retail properties (46.2% of total net rentable area (NRA)), three multitenant unanchored retail properties (34.4% of total NRA), and one single-tenant pharmacy-anchored retail property (19.4% of total NRA). This loan most recently transferred to special servicing in December 2020 for payment default and default on the cash management provisions. Since October 2019, the loan has been delinquent several times but was showing current as of the December 2020 reporting. Although the outstanding defaults and historical delinquency are indicative of increased risks for this loan, DBRS Morningstar notes a primary mitigating factor in the roughly 83.5% of the portfolio’s total NRA that is leased to investment-grade-rated tenants including Bank of America, TD Bank, JP Morgan Chase, Walgreens, and CVS. As such, recent payment defaults appear to be sponsor-related, rather than a performance-driven issue.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

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 applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

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

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loan in the transaction:

-- Prospectus ID#2 – NY & CT NNN Portfolio (5.6% of the pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology (March 6, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. 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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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 [email protected].

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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