Morningstar DBRS Confirms Credit Ratings on Two Classes of CSWF Trust 2018-TOP

DBRS, Inc. (Morningstar DBRS) confirmed the credit ratings on the Commercial Mortgage Pass-Through Certificates, Series 2018-TOP issued by CSWF Trust 2018-TOP as follows:

-- Class G at AA (low) (sf)
-- Class H at BB (low) (sf)

Morningstar DBRS also changed the trend on Class H to Stable from Negative. The trend on Class G is Stable.

During the prior credit action in April 2024, Morningstar DBRS downgraded its credit ratings on classes G and H to reflect the updated Morningstar DBRS values that were derived for the remaining assets in the pool in two single-tenant office properties located in Tempe, AZ, and Tampa. The credit rating downgrades and Negative trend on the Class H certificate with the April 2024 review also reflected the increased risks related to the specially serviced status of the loan and the decline in demand for older, less favorably located collateral such as the subject properties.

With this review, Morningstar DBRS considered a recoverability analysis based on a conservative haircut to the most recent appraisal values. The result of that analysis suggests that the two rated certificates in Class G and Class H, which combine for a balance of $23.1 million as of the February 2025 remittance, would be fully repaid, with realized losses contained to the $21.2 million unrated Class HRR certificate, supporting the credit rating confirmations with this review. The underlying loan transferred to the special servicer for maturity default in August 2023, and a loan modification was approved to extend the loan term to August 2024. The borrower failed to repay the loan at the extended maturity date, and the most recent servicer commentary notes that the lender and borrower are engaged in discussions to sell one of the remaining assets.

The underlying loan funded the collateral portfolio's acquisition and recapitalization for the sponsor, TPG Real Estate's TPG Real Estate Partners Fund II. At issuance, the loan collateral included a portfolio composed of the fee-simple and leasehold interests in a portfolio of 15 mostly single-tenant Class A office properties totaling 3.1 million square feet (sf) in 11 states. All but two properties, totaling about 250,000 sf, have been released to date, with commensurate paydown for the trust in accordance with the release provisions, which resulted in all releases since April 2021 requiring a paydown equal to 115.0% of the allocated loan amount (ALA) and a sequential pay structure for the transaction certificates.

The largest asset by ALA, Eisenhower Campus, consists of one office building, 4931 George Road (at securitization, the property consisted of two buildings, but the 4904 Eisenhower Boulevard building was released in May 2022) in Tampa totaling about 130,000 sf of net rentable area (NRA). The building's sole tenant, E.R. Squibb and Sons, LLC, occupies 100.0% of the building on a lease scheduled to expire in December 2025. Although the tenant extended its lease by 18 months (the original lease expiration date was in June 2024), Morningstar DBRS previously noted that the short-term nature may be indicative of the tenant's lack of longer-term commitment to the space. The servicer noted that the borrower is in negotiations to sell the building, but nothing has been finalized to date. The other remaining property is a 124,000-sf office building in Tempe that is fully occupied by Amazon.com Services, Inc. (Amazon) on a lease that was recently extended through July 2029. The property was previously under contract after a buyer was identified; however, the special servicer noted that the sale ultimately fell through, and the borrower's broker has relaunched the marketing campaign for the property.

Given the volatility in the loan's workout process to date as well as the general lack of end-user demand for office properties, particularly in secondary markets, challenging the borrower's efforts to sell the remaining properties, the recoverability analysis considered by Morningstar DBRS applied a conservative 50.0% haircut to the most recent appraisals the special servicer provided, both dated February 2024. The resulting aggregate Morningstar DBRS value of $28.2 million for the remaining properties reflects a whole-loan loan-to-value ratio (LTV) of 149.6% (when considering only the rated classes G and H, the LTV is 74.3%). Although the LTV is high, the recoverability analysis would continue to suggest full repayment of those classes up to a stressed haircut on the appraised values of nearly 63.0%. These factors contributed to the credit rating confirmations and change in trend to Stable from Negative for the BB (low) (sf) credit-rated Class H certificate.

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, or 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.

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 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, Inc.
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Chicago, IL 60602 USA
Tel. +1 312 332-3429

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
-- Legal Criteria for U.S. Structured Finance (December 3, 2024), https://dbrs.morningstar.com/research/444064
-- Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024), https://dbrs.morningstar.com/research/428623
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283

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