DBRS Morningstar Confirms All Classes of Ready Capital Mortgage Trust 2018-4

DBRS Limited (DBRS Morningstar) confirmed the ratings on the following classes of Ready Capital Mortgage Trust 2018-4 Commercial Mortgage Pass-Through Certificates issued by Ready Capital Mortgage Trust 2018-4:

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

All trends are Stable.

The rating confirmations reflect the overall stability of the transaction since issuance. At issuance, the transaction consisted of 50 loans at an original trust balance of $165.0 million, and per the November 2021 remittance, 36 loans remain in the transaction at a current trust balance of $101.4 million, representing a collateral reduction of 38.5%. There are 14 loans, representing 35.2% of the pool, on the servicer’s watchlist and two loans, representing 5.6% of the pool, in special servicing.

The largest loan in special servicing is the Morrison Opera House (Prospectus ID#7, 4.8% of the pool). The loan transferred to special servicing in June 2020 due to monetary default amid the Coronavirus Disease (COVID-19) pandemic. In addition to the business interruption as a result of the pandemic, cash flow has been depressed after the property’s previous second-largest tenant, Hard Rock Cafe (21.2% of net rentable area (NRA)), vacated at its lease expiry in April 2019. Cash management was triggered after Hard Rock Cafe vacated and these captured funds were subsequently approved to be applied to debt service payments from April 2020 through June 2020 as part of a forbearance that then also deferred payments from July 2020 through September 2020, which were scheduled to then be repaid over the following 12 months. As the loan is currently reported as delinquent, it appears likely that this repayment plan has not yet been met.

The most recent appraisal reported by the servicer, dated January 2021, valued the property at $4.5 million, down 41% from the appraised value of $7.7 million at issuance. According to the trailing nine months ended September 30, 2021, financials, the loan reported an annualized debt service coverage ratio (DSCR) of 0.45 times (x), as compared with the issuer’s underwritten DSCR of 1.30x. Occupancy was reported at 64% in September 2021, 56% in December 2019, and 91% at issuance. The property’s tenancy comprises three tenants, Kenzie Academy (48.1% of NRA; lease expires in January 2024), Brannon Sowers & Cracraft PC (11.1% of NRA; lease expires in January 2025), and Wild Beaver Saloon (4.9% of NRA; lease expires April 2026).

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 IO-A and IO-B/C 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#7 – Morrison Opera House (4.8% 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.

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