DBRS Morningstar Confirms All Ratings for Natixis Commercial Mortgage Securities Trust 2018-ALXA

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

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of this transaction, which is in line with DBRS Morningstar’s expectations. The loan is secured by Centre 425 Bellevue, a 356,909-square-foot (sf) Class A LEED Silver-certified office building in downtown Bellevue, Washington, approximately 10 miles east of Seattle. The condominium interest includes 98.3% of the leasable square footage within the 16-story structure, in addition to an eight-level underground parking garage. The property is 100.0% occupied by Amazon.com, Inc. (Amazon) and Starbucks Corporation (Starbucks), both investment-grade-rated tenants, with Amazon accounting for 99.4% of the net rentable area. In 2017, Amazon executed a 16-year triple net lease that extends well beyond the 10-year loan term to September 30, 2033. Also in 2017, Starbucks executed a 10-year triple net lease through to June 2027 with two five-year renewal options.

The loan is sponsored by RFR Holdings LLC and Tristar Capital, whose principals serve as guarantors for the transaction. Loan proceeds of $208.5 million, $57.6 million of mezzanine debt, and $71.7 million of borrower equity were used to finance the acquisition of the subject for a purchase price of $313.0 million, fund upfront reserves, and cover closing costs. The fixed-rate interest-only (IO) mortgage loan has an anticipated repayment date (ARD) in 2027 and final loan maturity in 2033.

As at the March 2021 rent roll, Amazon is paying rent of $36.24 per square foot (psf) with annual rental rate escalations of 2.25%, while Starbucks is paying rent of $39.90 psf with a 10.0% rent escalation in July 2022. Amazon’s lease has no termination options; it can downsize its space by whole-floor increments but must maintain at least 175,000 sf at the collateral. Its lease is also guaranteed by Amazon subject to a cap of $190.0 million for the first five years, which reduces by $19.0 million each year thereafter. As of the most recent financials, the collateral reported a debt service coverage ratio (DSCR) of 1.72 times (x) at year-end (YE) 2020 a slight increase from the YE2019 DSCR of 1.68x and up significantly from the YE2018 DSCR of 1.12x when Amazon’s free rent period was burning off.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance related-data.
For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com The platform includes loan-level 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 26, 2021), 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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