DBRS Morningstar Confirms All Classes of BANK 2018-BNK10
CMBSDBRS Limited (DBRS Morningstar) confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2018-BNK10 issued by BANK 2018-BNK10:
-- 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-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class X-B at A (high) (sf)
-- Class C at A (sf)
-- Class X-D at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class X-E at BB (sf)
-- Class E at BB (low) (sf)
-- Class X-F at B (sf)
-- Class F at B (low) (sf)
All trends are Stable.
The rating confirmations reflect the overall stable performance of the transaction since issuance. As of the January 2021 remittance, there has been a collateral reduction of 1.3%, with all 68 loans remaining in the pool. According to the YE2019 financials, the servicer reported a weighted-average debt service coverage ratio (DSCR) of 2.05 times (x), compared with the DBRS Morningstar DSCR at issuance of 2.31x. The pool is fairly concentrated by property type as 10 loans, representing 25.0% of the pool, are secured by office properties; 10 loans (21.4% of the pool) are secured by self-storage properties; and 14 loans (18.7% of the pool) are secured by retail properties, with these three property types collectively representing 65.1% of the pool.
As of the January 2021 remittance, there are four loans in special servicing, including the 14th-largest loan in the pool, Courtyard Los Angeles Sherman Oaks (Prospectus ID#14, 2.2% of the pool balance), which is secured by a 213-key full-service hotel located in Sherman Oaks, California. The loan was transferred to special servicing in July 2020 for imminent default, and the servicer continues to negotiate with the borrower regarding potential loan modification measures to accommodate the disruptions in cash flow at the property as a result of the Coronavirus Disease (COVID-19) pandemic. As of the January 2021 remittance, the loan was listed 121+ days delinquent and was last paid in May 2020.
Although the pre-pandemic performance was generally healthy, the trailing 12 months ended March 31, 2020, DSCR of 2.03x, was down from the YE2019 figure of 2.18x. As of a July 2020 Smith Travel Research report, the property reported an occupancy, average daily rate (ADR), and revenue per available room (RevPAR) of 57.9%, $210.60, and $122.04, respectively, compared with the competitive set’s occupancy rate of 64.4%, ADR of $183.32, and RevPAR of $118.05. Based on the August 2020 appraisal obtained by the special servicer, the property was valued at $48.7 million, a 43.3% decline compared with the issuance appraised value of $85.9 million, but just under the combined principal balance of $55.0 million for the pari passu whole loan held across the subject trust and the WFCM 2017-C42 transaction, which was not rated by DBRS Morningstar. The strong historical performance should incentivize the sponsor to continue working toward a resolution of the outstanding defaults, but there are noteworthy risk factors in the $6.9 million cash out for the subject transaction, which refinanced previous commercial mortgage-backed security debt, and the Marriott franchise agreement expires during the loan term, in 2024.
The remaining three specially serviced loans totalled 1.7% of the pool and were all transferred to special servicing because of pandemic-related hardships.
According to the January 2021 remittance, 17 loans are on the servicer’s watchlist, representing 25.3% of the current pool balance. The servicer is monitoring these loans for various reasons, including a low DSCR or occupancy figure, tenant rollover risk, and/or pandemic-related forbearance requests. Many of the larger loans on the servicer’s watchlist are backed by lodging properties, including the fourth-largest loan in the pool, Wisconsin Hotel Portfolio (Prospectus ID#4, 5.5% of the pool), and the second-largest loan in the pool, Roedel Hotel Portfolio (Prospectus ID#5, 3.2% of the pool). Although both loans are being monitored for low DSCRs, it is noteworthy that neither is being monitored for a pandemic-related relief request and both remain current.
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, X-D, X-E, and X-F 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 loans in the transaction:
-- Prospectus ID#4 – Wisconsin Hotel Portfolio (5.5% of the pool)
-- Prospectus ID#14 – Courtyard Los Angeles Sherman Oaks (2.2% 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 info@dbrsmorningstar.com.
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 info@dbrsmorningstar.com.
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