DBRS Morningstar Confirms All Ratings on CSMC 2018-SITE

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

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

All trends are Stable.

The rating confirmation reflects the overall stable performance of the transaction since DBRS Morningstar’s last rating action. The collateral for the trust is provided by a portion of the first-lien mortgages on a portfolio of 10 cross-collateralized and cross-defaulted retail properties across nine states, encumbering the borrower’s fee-simple interest on each of the properties. The properties include a mix of seven power centers and three community centers in 10 distinct markets. The retail properties total 4.1 million square feet (sf), of which approximately 3.4 million sf is collateral for the underlying mortgages.

The trust loan is part of a split loan structure and includes a $170.0 million senior promissory A note and a $144.3 million subordinate promissory B note. The mortgage whole loan includes an additional $50.0 million (non-trust) senior pari passu promissory A note contributed to the DBRS Morningstar rated CSAIL 2019-C15 transaction. The whole loan is evidenced by a 64-month, interest-only (IO), fixed-rate mortgage loan totalling $364.3 million in financing, with a maturity date in April 2024.

YE2021 servicer reporting noted a considerable improvement in cash flow across all 10 of the portfolio properties, compared with YE2020 reporting when the collateral faced cash flow disruptions as a result of lower rental collections ultimately caused by the Coronavirus Disease (COVID-19) pandemic. Servicer reported net cash flow at YE2021 was $44.8 million, compared with $36.6 million at YE2020 and $38.8 million at issuance. Likewise, the weighted-average (WA) debt service coverage ratio (DSCR) improved from 2.06 times (x) at YE2020 to 2.53x at YE2021. Only one property reported a DSCR below 1.5x. The loan has never been delinquent and, to date, not a single relief request has been submitted by the sponsor.

The portfolio loan benefits from its highly granular rent roll, geographic diversity, and strong tenant mix.
As of YE2021, consolidated occupancy across the portfolio was 95.2%, an improvement from the YE2020 occupancy rate of 88.2%. The tenant roster includes over 180 unique tenants across 250 tenant spaces, with no single tenant accounting for more than 7.6% of the portfolio’s net rentable area (NRA), and no single tenant space accounting for more than 4.0% of portfolio NRA. Each of the properties is in a different market, with the greatest market exposure to the Phoenix (20.2% of NRA and 25.6% of the allocated loan amount (ALA)), Hartford (16.6% of NRA and 15.3% of ALA), and Kansas City (11.3% of NRA and 11.8% of ALA) markets. Seven properties have grocery store anchors or shadow anchors.

The five largest tenants are Lowe’s (7.6% of collateral NRA); Kohl’s (7.0% of NRA); AMC Theatres (6.8% of NRA); The TJX Companies, Inc. (6.0% of NRA); and Dick’s Sporting Goods (5.4% of NRA). The vast majority of big box anchor tenants are on long-term leases and have multiple lease extension options available. Moreover, the tenant mix for the portfolio consists of a number of credit-rated tenants, including Lowe’s; Kohl’s; TJX; Ross Stores, Inc.; and Best Buy Co., Inc. Major shadow anchors include Target (three properties), Sam’s Club (one property), and Kohl’s (one property).

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

Class X is an IO certificate that references 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 this transaction.

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.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology (March 4, 2022), 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.

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].

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