DBRS Morningstar Confirms All Ratings of Natixis Commercial Mortgage Securities Trust 2018-SOX

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

-- Class A at AAA (sf)
-- Class B at AAA (sf)
-- Class X at AA (sf)
-- Class C at AA (low) (sf)
-- Class V-ABC at AA (low) (sf)
-- Class D at A (low) (sf)
-- Class V-D at A (low) (sf)
-- Class E at BBB (low) (sf)
-- Class V-E at BBB (low) (sf)
-- Class V2 at BBB (low) (sf)

All trends are Stable.

The rating confirmations reflect the transaction’s overall stable performance, which remains in line with DBRS Morningstar’s expectations. The transaction consists of a $110.0 million first mortgage secured by the fee-simple interest in the InterContinental Boston hotel. The property is master leased by the sponsor to InterContinental Hotels Group Resources, Inc. (IHG), under a triple net lease on a 99-year initial term with two 20-year extension options, and a fully extended maturity date stretching to July 2145. The lease is guaranteed by Six Continents, PLC, which is a wholly owned subsidiary of InterContinental Hotels Group, with an expiration of the guarantee in July 2032, four years after the loan’s maturity date. Additional financing includes a $65.0 million subordinate B note and two mezzanine loans of $60.0 million and $30.0 million, respectively, held outside of the trust. The mezzanine loans are co-terminous with the whole loan’s maturity date. The 10-year loan is interest only (IO) for its entirety with a maturity date in June 2028.

The InterContinental Boston is a 424-room, full-service, Four Diamond AAA-rated hotel in downtown Boston adjacent to the Financial and Seaport districts. In close proximity to the subject are the Boston Convention and Exhibition Center, New England Aquarium, and the Boston Tea Party Ships and Museum in addition to various shops and restaurants. The collateral consists of the fee interest in the first 12 floors of the 20-story building, which offers 32,000 square feet (sf) of meeting space; three restaurants; and a spa, health, and fitness centre. IHG self-manages the property. The hotel completed a $20.0 million renovation in June 2020, which included a renovation of all guest rooms and corridors as well as meeting spaces and the two main restaurants.

As a result of the borrower having entered into a master lease of the property, the rent from the master lease represents the primary income source for the repayment of the loan. The lease rent stepped up to $21.1 million in August 2022 (the 17th year of the lease agreement), from $16.0 million. The current lease rent is scheduled to be fixed until 2042 (the 36th year of the lease agreement). According to the terms of the loan, the borrower is not required to report information on the performance of the tenant unless the IHG lease is terminated. As a result, no occupancy or financial information was provided for the hotel operations. The borrower has remained current on its debt service obligations and, based on the most recent June 2022 reporting, which does not incorporate lease rent steps, the loan had a debt service coverage ratio of 2.97 times (x) (1.84x when including the noncollateral B note), which has remained constant since issuance.

The loan sponsor is Extell Boston Atlantic LLC (Extell), a subsidiary of Extell Development. Founded in 1989, Extell has developed more than 25.0 million sf of luxury residential, commercial, hospitality, and mixed-use properties throughout major markets in the U.S. with a concentration in New York.

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.

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 the 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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