DBRS Morningstar Confirms Ratings on All Classes of Benchmark 2018-B4 Mortgage Trust, Removes Negative Trends on Three Classes

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass Through Certificates, Series 2018-B4 issued by Benchmark 2018-B4 Mortgage Trust as follows:

-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-B at AA (high) (sf)
-- Class B at AA (sf)
-- Class C at A (high) (sf)
-- Class X-D at A (sf)
-- Class D at A (low) (sf)
-- Class E-RR at BBB (sf)
-- Class F-RR at BB (high) (sf)
-- Class G-RR at B (high) (sf)

With this review, DBRS Morningstar has changed the trends on Classes E-RR, F-RR, and G-RR to Stable from Negative. All other trends are Stable.

The rating confirmations and trend changes primarily reflect the reduced risk the specially serviced loans pose to the trust, as the number of such loans has declined to two (4.2% of the pool) as of the November 2021 remittance from five (9.2% of the pool) during the previous review. Furthermore, the two remaining loans in special servicing, the JAGR Hotel Portfolio (Prospectus ID#15, 2.6% of the pool) and Atlantic Times Square (Prospectus ID#25, 1.6% of the pool), have both agreed to loan modifications and are expected to return to the master servicer in the near term. Also, The Crowne Plaza Dallas (Prospectus ID#16, 1.0% of the pool), a previously specially serviced loan, repaid in full with the November 2021 remittance. While there are eight loans (14.6% of the pool) on the servicer’s watchlist, many of which have been heavily affected by the Coronavirus Disease (COVID-19) pandemic, all loans remain current, showing general signs of recovery.

According to the November 2021 remittance, 43 of the original 44 loans remain in the pool with an aggregate principal balance of $1.12 billion, representing a 3.4% collateral reduction since issuance as a result of loan amortization and loan repayments. One loan, representing 0.5% of the pool, has fully defeased. The pool is most heavily concentrated in office, retail, and hospitality properties, representing 30.7%, 27.7%, and 14.3% of the current pool balance, respectively.

The JAGR Hotel Portfolio loan is the largest loan in special servicing and is secured by three full-service hotels totaling 721 keys in secondary markets in three different states: Hilton Jackson (276 keys), DoubleTree Grand Rapids (226 keys), and DoubleTree Annapolis (219 keys). The loan was transferred to special servicing for imminent default in August 2020 and is 121-plus days delinquent as of the November 2021 reporting. However, a loan modification closed in November 2021, which included an extension of the interest-only (IO) period through October 2022, deferral of interest payments, a one-year maturity extension through May 2024, and a one year waiver of furniture, fixtures, and equipment reserve payments. The loan is expected to be reinstated in early 2022. Based on financials as of June 2021, the loan had a coverage of -0.43 times (x), compared with 2.12x at YE2019, primarily as a result of departmental revenue loss. While performance at DoubleTree Annapolis has shown signs of improvement with a T-3 penetration rate of 127.9% ending in September 2021, property performance remains depressed for DoubleTree Grand Rapids and Hilton Jackson, reflecting comparable figures of 81.7% and 90.8%, respectively. Prior to the pandemic, Hilton Jackson outperformed its market with a trailing 12-month (T-12) revenue per available room (RevPAR) penetration of 119.7% based on the YE2019 STR report. DoubleTree Annapolis and DoubleTree Grand Rapids reported T-12 RevPAR figures of 107.6%, and 115.4%, respectively.

The Atlantic Times Square loan (Prospectus ID#25, 1.6% of the pool) is secured by a mixed-use (retail and multifamily) complex in Monterey Park, California. The retail component totals 212,800 square feet, while the multifamily component comprises 100 Class A units. There are also 110 condo units at the property that do not serve as collateral. The loan was transferred to special servicing in November 2020 for payment default following a rise in rent collection issues, following the temporary closure of many tenants, including AMC Theatres (19.8% of the net rentable area (NRA), expiring August 2030) and 24 Hour Fitness (8.1% of the NRA, expiring August 2025); both of which have since reopened. A loan modification closed in August 2021. The lender retroactively agreed to defer 50% of the interest payment for six months as well as monthly reserve payments, with deferrals to be repaid from cash flow no later than October 2022. These deferred amounts are backed by a personal guarantee and the loan is expected to be returned to the master servicer shortly. Based on the financials as of September 2020, the load had a coverage of 0.61x, compared with 2.05x at YE2019. Occupancy was reported at 96.5%, in line with 96.0% at YE2019.

At issuance, DBRS Morningstar assigned an investment-grade shadow rating to six loans: Aventura Mall (Prospectus ID#1, 10.2% of the current pool balance), 181 Fremont Street (Prospectus ID#2, 7.1%), Marina Heights State Farm (Prospectus ID#3, 5.3%), The Gateway (Prospectus ID#5, 4.4%), Aon Center (Prospectus ID#6, 4.4%), and 65 Bay Street (Prospectus ID#9, 3.5%). As part of this review, DBRS Morningstar confirmed that the performance of these loans remains consistent with the investment-grade loan characteristics.

ESG CONSIDERATIONS

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.

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 loans in the transaction:

-- Prospectus ID#10 – Sheraton Music City (3.4% of the pool)
-- Prospectus ID#15 – JAGR Hotel Portfolio (2.6% of the pool)
-- Prospectus ID #25 – Atlantic Times Square (1.6% 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 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

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

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577