Morningstar DBRS Confirms Credit Ratings on All Classes of Natixis Commercial Mortgage Securities Trust 2018-ALXA

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2018-ALXA issued by Natixis Commercial Mortgage Securities Trust 2018-ALXA:

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

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the underlying collateral, which remains in line with Morningstar DBRS' expectations. The loan is collateralized by Centre 425 Bellevue, a 356,909-square-foot (sf) Class A office building in downtown Bellevue, Washington, approximately 10 miles east of Seattle. The condominium interest includes 98.3% of the leasable square footage within the 16-story structure in addition to an eight-level underground parking garage. The property is predominantly occupied by the investment-grade tenant Amazon.com, Inc. (Amazon) on a triple-net lease that extends to September 2033.

The 10-year fixed-rate interest-only mortgage loan has an anticipated repayment date in 2027 and final loan maturity in 2033. The $124.5 million trust balance includes a $10.0 million piece of a split pari passu senior loan and a $114.5 million subordinate B note. A pari passu piece of the senior loan is held in the CSAIL 2017-CX10 transaction, also rated by Morningstar DBRS. Additional debt consists of a $57.6 million mezzanine loan, which is co-terminous with the trust mortgage loan. The loan is sponsored by RFR Holdings LLC and Tristar Capital LLC, whose principals serve as guarantors for the transaction.

According to the December 2024 rent roll, the collateral was 100.0% occupied. Amazon accounted for 99.4% of the net rentable area, paying a base rental rate of $39.60 per sf, subject to annual rent escalations of 2.25%. Per the lease agreement, Amazon's initial lease expiry is on September 30, 2033, with three five-year extension options remaining and no termination options available. The lease is also guaranteed by Amazon, subject to a cap of $190.0 million for the first five years, which reduces by $19.0 million each year thereafter.

In early 2023, Amazon laid off nearly 2,300 employees in the Seattle and Bellevue area following the adoption of a hybrid work model. While significant, Morningstar DBRS did not believe the layoffs posed significantly increased risks for the subject transaction given Amazon's long-term lease with no termination options and the company's investment-grade status. According to more recent news sources, CEO Andy Jassy announced a policy shift, requiring all employees to return to the office full time, which is expected to significantly impact Downtown Bellevue, where Amazon maintains a substantial office presence of over 12,000 employees.

According to the September 2024 financial reporting, the annualized net cash flow (NCF) for the trailing nine months ended September 30, 2024, was reported at $16.9 million with a debt service coverage ratio (DSCR) of 1.88 times (x) based on total mortgage debt, in line with the year-end (YE) 2023 NCF figure of $16.8 million, reflecting a DSCR of 1.87x. Morningstar DBRS' previous credit rating action in April 2024 included an update to the asset's valuation. For more information regarding the approach and analysis conducted, please refer to the press release titled "Morningstar DBRS Takes Rating Actions on North American Single-Asset/Single-Borrower Transactions Backed by Office Properties," published on April 15, 2024.

For purposes of this credit rating action, Morningstar DBRS maintained the valuation approach from the April 2024 review, which was based on a capitalization rate of 7.25% applied to the Morningstar DBRS NCF of $15.9 million based on a stress to the YE2022 NCF figure. Morningstar DBRS maintained positive qualitative adjustments to the loan-to-value ratio (LTV) sizing benchmarks totaling 6.25% to reflect the property's quality, stable tenancy, and its location within a strong market. The Morningstar DBRS concluded value of $219.8 million represents a variance of -30.4% from the issuance appraised value of $316.0 billion million and implies a whole-loan LTV of 121.0%.

Morningstar DBRS' credit rating on the applicable classes addresses 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) at https://dbrs.morningstar.com/research/437781.

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 (February 28, 2025)
https://dbrs.morningstar.com/research/448963

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 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.

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 Single-Asset/Single-Borrower Ratings Methodology (February 28, 2025), https://dbrs.morningstar.com/research/448962
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283
-- Legal Criteria for U.S. Structured Finance (December 3, 2024),
https://dbrs.morningstar.com/research/444064

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.

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