Morningstar DBRS Confirms All Credit Ratings of CSAIL 2018-CX12 Commercial Mortgage Trust

DBRS Limited (Morningstar DBRS) confirmed all credit ratings on the classes of Commercial Mortgage Pass-Through Certificates, Series 2018-CX12 issued by CSAIL 2018-CX12 Commercial Mortgage Trust as follows:

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

All trends are Stable.

The credit rating confirmations and Stable trends reflect the overall performance of the transaction since Morningstar DBRS' last surveillance review. Although the transaction reports an elevated special servicing concentration, with two loans, representing 13.9% of the pool, Morningstar DBRS believes both loans are likely to transfer back to the master servicer in the near term and Morningstar DBRS' stressed analysis suggests that the current credit ratings continue to reflect the pool's overall risk profile. The pool continues to report a healthy weighted-average (WA) debt service coverage ratio (DSCR) of over 2.00 times (x) and two loans, representing 18.4% of the pool, are shadow rated investment grade, further supporting the credit rating confirmations with this review.

As of the August 2024 remittance, 36 of the original 41 loans remained in the pool, with an aggregate principal balance of $590.7 million, representing a collateral reduction of 12.2% since issuance as a result of loan amortization, repayment, and liquidations. By property type, the pool is most concentrated by loans backed by retail and lodging properties, which represent 39.4% and 23.6%, respectively. The pool benefits from limited exposure to loans secured by office collateral, with four loans, representing 9.4% of the pool. Three loans, representing 4.2% of the pool, are defeased. Eight loans, representing 24.5% of the pool, are being monitored on the servicer's watchlist and two loans, representing 13.9% of the pool, are in special servicing.

The largest loan in the pool, 20 Times Square (Prospectus ID#1, 9.9% of the pool), secured by the leased-fee interest in 16,066 square feet (sf) of land under 20 Times Square in Manhattan, was previously specially serviced due to numerous undischarged mechanics liens against the underlying property, which consists of a 452-key Marriott Edition luxury hotel, 74,820 sf of retail space, and 18,000 sf of digital billboards. A uniform commercial code (UCC) foreclosure was completed in October 2023 with the mezzanine lender assuming the loan. As part of the UCC foreclosure, the loan's maturity was extended two years to May 2025 in exchange for a $50.0 million principal curtailment and the loan was returned to the master servicer in January 2024. According to the servicer commentary, the aforementioned mechanics liens have been resolved and, starting with the August 2024 payment, half of excess cash generated by the collateral will be applied as principal paydown. Following the release of the mechanics liens and the presence of a new, motivated owner, Morningstar DBRS expects the loan to continue to perform in line with issuance expectations given the long-term ground lease, which increases 2.75% per year. The subject loan is part of the $750.0 million whole loan, of which $600.0 million is secured in a single-asset/single-borrower (SASB) transaction, 20 Times Square Trust 2018-20TS (TSQ 2018-20TS), which is rated by Morningstar DBRS. In its analysis for the TSQ 2018-20TS transaction, Morningstar DBRS estimated the value of the leased-fee component at approximately $758.6 million, resulting in a whole-loan loan-to-value ratio (LTV) of 90.1% and a senior debt LTV of just 31.8%. Given the low A-note LTV and additional deleveraging from the $50.0 million principal curtailment, Morningstar DBRS maintained the loan's investment-grade shadow rating with this review.

The largest loan in special servicing, Riverfront Plaza (Prospectus ID#4, 7.1% of the pool), is secured by a 949,875-sf, Class A, office complex in Richmond, Virginia. The loan transferred to special servicing in January 2024 due to the borrower failing to comply with excess cash requirements, which were activated after the property's second-largest tenant, Truist Bank (14.9% of net rentable area), went dark in February 2022. Cash management is now in place and the special servicer is reportedly working with the borrower to return the loan to the master servicer. According to the June 2024 rent roll, the property was 81.8% leased, with Truist Bank remaining on the rent roll, as the tenant will reportedly continue to pay rent through its lease expiration in August 2025. Excluding Truist Bank and, in absence of any additional leasing activity, physical occupancy would fall to approximately 66.9% with the loans DSCR likely falling from 1.55x as of YE2023 to below 1.30x. According to Reis, the Richmond Central Business District submarket reported a vacancy rate of 13.4% as of Q2 2024, which is projected to remain flat over the next two years. In its analysis for this review, Morningstar DBRS stressed the loan's LTV given the likely value decline and applied a probability of default penalty, resulting in an expected loss nearly 3.0x the pool average.

The second loan in special servicing, SIXTY Hotel Beverly Hills (Prospectus ID#6, 6.8% of the pool), is secured by a 118-key, full-service hotel in Beverly Hills. The loan transferred to special servicing in August 2023 at the request of the borrower in order to request an additional extension beyond the loan's February 2024 maturity date. A forbearance agreement was executed until June 2024 in order to give the borrower additional time to secure refinancing. The loan was modified in August 2024 to extend the loan's maturity date two years to February 2026 with one six-month extension option available. As a condition to the extension, the loan's interest rate will increase and the borrower will be required to pay down the loan by $2.0 million, with an additional $1.0 million paydown to follow in nine months. According to the trailing nine-month period ended September 30, 2023, financials, annualized net cash flow (NCF) was reported at $3.6 million (a DSCR of 1.87x), approximately 15% below the Morningstar DBRS NCF of $4.2 million derived at issuance. The property was re-appraised in March 2024 at a value of $59.5 million (LTV of 67.2%), representing a 32.3% decline from the issuance value of $85.0 million. In its analysis for this review, Morningstar DBRS stressed the loan's LTV and applied a probability of default penalty, resulting in an expected loss approximately 15% greater than the pool average.

At issuance, Morningstar DBRS assigned investment-grade shadow ratings on the 20 Times Square, Aventura Mall (Prospectus ID#3, 8.5% of the pool), and Queens Place (Prospectus ID#5, 7.1% of the pool) loans. With this review, Morningstar DBRS confirmed that the performance of the 20 Times Square and Aventura mall loans remains consistent with investment-grade loan characteristics. Morningstar DBRS removed the shadow rating on Queens Place given the loan's declining financial performance since issuance, significant upcoming tenant rollover, and exposure to a struggling retailer in Macy's.

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, 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 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 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 ratings were initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for these credit rating actions.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with these credit rating actions.

These are solicited credit ratings.

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

DBRS Limited
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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
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283
-- Legal Criteria for U.S. Structured Finance (April 15, 2024), https://dbrs.morningstar.com/research/431205
--Morningstar DBRS Commercial Real Estate Property Analysis Criteria (September 19, 2024; https://dbrs.morningstar.com/research/439702)

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 https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.