DBRS Morningstar Confirms All Ratings on DBGS 2018-BIOD Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed its ratings on the following classes of the Commercial Mortgage Pass-Through Certificates, Series 2018-BIOD issued by DBGS 2018-BIOD Mortgage Trust:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which remains in line with DBRS Morningstar’s expectations. The loan is secured by a portfolio of 16 office/lab buildings, three office buildings, and one parking garage. The properties are located across California, Washington, Massachusetts, New York, Pennsylvania, and New Jersey. The loan benefits from its collateral concentration located within life science clusters including Boston-Cambridge, the San Francisco Bay Area, San Diego, and New Jersey, in addition to Seattle, which is considered an emerging science hub. The sponsor is an affiliate of The Blackstone Group Inc., which acquired the subject in 2016 as part of the acquisition of BioMed Realty Trust, Inc. The loan had an initial two-year term with five one-year extension options, with two of its options exercised. The loan is interest only for the fully extended term.

At issuance, the whole-loan proceeds included $725.0 million of senior debt, which is held in the subject trust, $140.0 million of senior mezzanine debt, and $95.0 million of junior mezzanine debt. The loans were used to refinance existing debt of $714.6 million, with $216.9 million of equity returned to the sponsor. The loan is structured with a partial pro rata/sequential-pay structure, as the loan allows for pro rata paydowns for the first 25.0% of unpaid principal balance. The underlying release provisions convey the prepayment premium for the release of the individual assets at 105.0% for the first 25.0% of the senior loan balance and 110.0% thereafter.

Since issuance, the Walnut Street and Trade Centre Avenue properties have been released, with the release prices bringing the senior note balance down to $672.9 million. Those are the only property releases processed to date. This loan was previously on the servicer’s watchlist because of the extended maturity date in May 2021; however, the second extension option was exercised, with the loan now due in May 2022, and the loan was removed from the servicer’s watchlist as of the May 2021 remittance report. According to the December 2020 rent roll, the property was 81.6% occupied, which is a decline from the YE2019 occupancy rate of 92.6%. DBRS Morningstar has requested a leasing update from the servicer and a response is currently pending as of the date of this press release. Although occupancy has declined, it is still in line with DBRS Morningstar’s analysis at issuance, which assumed a vacancy loss of 17.1%. There are leasing reserves in place, and the sponsor made a $3.4 million payment in to the reserves with the May 2021 remittance.

According to the trailing 12-months ended September 2020 financials, the loan reported a net cash flow (NCF) of $71.9 million, compared with the YE2019 NCF of $73.6 million, YE2018 NCF of $69.9 million, and DBRS Morningstar NCF of $52.8 million.

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 loan 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 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 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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