Morningstar DBRS Downgrades Credit Ratings on Six Classes of Benchmark 2018-B6 Mortgage Trust and Changes Trends to Negative

DBRS Limited (Morningstar DBRS) downgraded its credit ratings on six classes of Commercial Mortgage Pass-Through Certificates, Series 2018-B6 issued by Benchmark 2018-B6 Mortgage Trust as follows:

-- Class D to BBB (sf) from BBB (high) (sf)
-- Class X-D to BBB (low) (sf) from BBB (sf)
-- Class E to BB (high) (sf) from BBB (low) (sf)
-- Class F-RR to BB (sf) from BB (high) (sf)
-- Class G-RR to B (high) (sf) from BB (sf)
-- Class J-RR to B (low) (sf) from B (sf)

In addition, Morningstar DBRS confirmed the following credit ratings:

-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)

Morningstar DBRS also changed the trends on Classes B and C to Negative from Stable. The trends on Classes D, E, F-RR, G-RR, J-RR, and X-D remained Negative. All other classes have a Stable trend.

The credit rating downgrades on Classes D, X-D, E, F-RR, G-RR, and J-RR are reflective of Morningstar DBRS' opinion that the overall credit risk profile for the transaction has continued to deteriorate since the last credit rating action. Morningstar DBRS' loss projections have increased, primarily driven by liquidation scenarios for two of the four loans in special servicing. Additionally, Morningstar DBRS notes a significant concentration of underperforming loans not yet in special servicing, primarily backed by office properties whose performance has not improved and/or continued to deteriorate since the last review. By property type, the pool is most concentrated by loans that are secured by office properties, representing 45.0% of the pool balance. Morningstar DBRS has a cautious outlook on this asset type as sustained upward pressure on vacancy rates in the broader office market may challenge landlords' efforts to back-fill vacant space, and, in certain instances, contribute to value declines, particularly for assets in noncore markets and/or with disadvantages in location, building quality, or amenities offered. Where applicable, Morningstar DBRS increased the probability of default (POD) penalties, and, in certain cases, applied stressed loan-to-value ratios (LTV) for loans exhibiting performance concerns.

The Negative trends reflect the potential for increased defaults given a number of large loans with significant upcoming rollover risk as well as increased default risk for one loan scheduled to mature in 2025. The Workspace - Trust loan (Prospectus ID#8, 3.8% of the pool) is backed by an underperforming office asset and is not expected to secure takeout financing ahead of its 2025 maturity date. Should Morningstar DBRS' loss expectations increase further or additional defaults occur, classes with Negative trends may be subject to credit rating downgrades. Offsetting some of the above-noted concerns are four loans in the top 15, representing 26.5% of the current pool balance, that are shadow-rated investment grade. Despite the increased loss expectations for the pool, the senior bonds remain well insulated from losses.

As of the July 2024 remittance, 52 of the original 55 loans remain in the pool with an aggregate principal balance of $1.05 billion, representing a collateral reduction of 8.1% since issuance. There are 13 loans, representing 23% of the pool, on the servicer's watchlist being monitored for low debt service coverage ratios (DSCRs), occupancy declines, servicing trigger events, and deferred maintenance. There are four loans in special servicing, representing 7.2% of the pool.

The largest non-specially serviced loan of concern is Workspace - Trust, which is secured by a portfolio of 147 properties, consisting of nearly 9.9 million square feet (sf) of office and flex space. The subject loan amount of $40.0 million is part of a whole loan of $1.3 billion secured across four other transactions. Three of these transactions are rated by Morningstar DBRS: JPMCC 2018-WPT (lead securitization), BMARK 2018-B5, and BMARK 2018-B7. The loan transferred to special servicing in April 2023 in advance of its July 2023 maturity date. The loan was modified with a two-year extension, resulting in a new maturity date of July 2025. As part of the loan modification, the borrower was required to make a $30 million principal curtailment, which is reflected in the lead securitization. The loan was returned to the master servicer in November 2023 following its modification. The loan is currently on the servicer's watchlist for a DSCR reported at 1.32 times (x) by the servicer as of YE2023.

Built between 1972 and 2013, the portfolio includes 88 office properties (6.5 million sf) and 59 flex buildings (3.4 million sf) located across four states (Pennsylvania, Florida, Minnesota, and Arizona). The most recent reporting for the subject transaction noted a net cash flow (NCF) of $98.9 million for the trailing 12-month period ended March 31, 2024, compared with $99.9 million as of YE2023. As part of its April 2024 credit rating action for the JPMCC 2018-WPT transaction, Morningstar DBRS derived an updated NCF of $89.8 million reflective of decreases in base rent and expense reimbursements following a drop in occupancy in recent years. The servicer reporting reflects an occupancy rate of 78% as of March 2024, down from 80.4% at December 2022 and 88.6% at issuance. The loan was analyzed with a stressed LTV based on the Morningstar DBRS value derived with the April 2024 review of JPMCC 2018-WPT, resulting in an expected loss that is approximately double the pool average.

The largest contributor to Morningstar DBRS' liquidated loss projections is the specially serviced loan, JAGR Hotel Portfolio (Prospectus ID#18; 1.9% of the pool), which is secured by a portfolio of three hotel properties in Mississippi, Michigan, and Maryland. The loan was previously in special servicing and received a modification, extending the maturity date to May 2024. It transferred to special servicing for a second time in March 2023 and is now in payment and maturity default. A receiver was appointed for one of the three properties in June 2024, and the special servicer continues to seek the appointment of a receiver for the remaining two properties. Since Morningstar DBRS' last credit rating action, the portfolio was reappraised at a value of $50.4 million, which remains well below the issuance appraised value of $73.5 million. In its analysis for this review, Morningstar DBRS liquidated the loan from the trust with an implied loss approaching $6.5 million or a loss severity in excess of 30.0%.

At issuance, Morningstar DBRS assigned investment-grade shadow ratings to the following loans: Aventura Mall (Prospectus ID#1; 10.4% of the pool), Moffett Towers II (Prospectus ID#2; 7.1% of the pool), West Coast Albertsons Portfolio (Prospectus ID#5; 6.2% of the pool), and TriBeCa House Conduit (Prospectus ID#11; 2.8% of the pool); with this review, all loans continue to exhibit investment-grade loan characteristics. As such, Morningstar DBRS has maintained the shadow ratings for all four loans with this review.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS   
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024; https://dbrs.morningstar.com/research/437781)

Classes X-A 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 credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

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

The principal methodology is North American CMBS Surveillance Methodology (March 1, 2024; https://dbrs.morningstar.com/research/428798)

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating assigned to Class B materially deviates from the credit rating implied by the predictive model. Morningstar DBRS typically expects there to be a substantial likelihood that a reasonable investor or other user of the credit ratings would consider a three-notch or more deviation from the credit rating stress(es) implied by the predictive model to be a significant factor in evaluating the credit ratings. The rationale for the material deviation is uncertain loan level event risk. The results of Morningstar DBRS' analysis suggested downward pressure through the middle of the bond stack, most pronounced for Class B; however, Morningstar DBRS has adequately stressed loans of concern and in the event of further deterioration the Negative trends assigned to that class indicate that future credit rating downgrades are possible.

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 info-DBRS@morningstar.com.

The credit rating was initiated at the request of the rated entity.
The rated entity or its related entities did participate in the credit rating process for this credit rating action.
Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.
This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' outlooks and credit ratings are monitored.

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

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

North American CMBS Multi-Borrower Rating Methodology (March 1, 2024)/North American CMBS Insight Model v 1.2.0.0 (https://dbrs.morningstar.com/research/428797)

Rating North American CMBS Interest-Only Certificates (June 28, 2024; https://dbrs.morningstar.com/research/435294)

Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (June 28, 2024; https://dbrs.morningstar.com/research/435293)
North American Commercial Mortgage Servicer Rankings (August 23, 2023; https://dbrs.morningstar.com/research/419592)
Legal Criteria for U.S. Structured Finance (April 15, 2024; https://dbrs.morningstar.com/research/431205/legal-criteria-for-us-structured-finance)

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279. (July 17, 2023)

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.