Morningstar DBRS Confirms Credit Ratings on All Classes of Morgan Stanley Capital I Trust 2018-MP

DBRS, Inc. (Morningstar DBRS) confirmed credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2018-MP issued by Morgan Stanley Capital I Trust 2018-MP as follows:

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

All trends are Stable.

The credit rating confirmations and Stable trends are reflective of the underlying loan collateral's consistently stable performance over the past several years, with a healthy debt service coverage ratio (DSCR) and year-over-year net cash flow (NCF) growth reported for the last several years. In 2020, the portfolio cash flows fell sharply below the Issuer's underwritten figures, a factor of the coronavirus pandemic's travel and other restrictions, according to the sponsor. Although cash flows continue to lag the issuance figures, year-over-year revenue growth has been consistently reported since the YE2021 reporting period and occupancy had generally hovered near 100% until YE2024, when the servicer reported the overall occupancy rate fell to 88.0%, from 96.0% at YE2023. However, the sponsor has made leasing strides that are expected to improve the overall occupancy rate by YE2025, according to the servicer. The transaction also benefits from the collateral portfolio's geographic diversity and consistent occupancy and strong sponsorship in Millennium Partners, which owns and operates a diverse commercial real estate portfolio valued in excess of $5.0 billion.

The loan is securitized by the fee-simple and leasehold interests in the Millennium Partners Portfolio, which includes eight properties with both office and retail components across four states and Washington, D.C. The properties are in the central hubs of New York; Boston; San Francisco; Washington, D.C.; and Miami. The collateral consists of approximately 1.55 million square feet of commercial space at the Millennium Tower Boston, the Lincoln Square Retail portfolio, the Four Seasons San Francisco, the Four Seasons Miami, the Ritz-Carlton Georgetown, and the Ritz-Carlton Washington, D.C. The subject properties are in dense, urban locations with little room for additional developments.

The subject whole loan is fixed-rate, interest only for the full 10-year loan term with a $710.0 million first mortgage and $280.2 million of mezzanine debt held outside the trust. Of the first mortgage amount, $225.9 million consists of nonpooled pari passu notes that were securitized in the following Morningstar DBRS-rated commercial mortgage-backed securities (CMBS) transactions: BANK 2019-BNK16, Morgan Stanley Capital I Trust 2018-L1, and BANK 2018-BNK14. The loan is also securitized in the non-Morningstar DBRS-rated transaction BANK 2018-BNK15. The borrower is permitted to release properties subject to certain conditions, including payment of a release amount that is 115% of the allocated loan amount for the released property. There have been no property releases to date.

The servicer reported a YE2024 NCF figure of $60.3 million, with a DSCR of 1.95 times (x), up from the YE2023 NCF figure of $58.0 million and a DSCR of 1.88x. The Issuer's NCF and DSCR were $70.4 million and 2.28x, respectively; and the Morningstar DBRS NCF derived when credit ratings were assigned in 2020 was $55.9 million, with an implied DSCR of 1.81x. Although cash flows have improved from the Morningstar DBRS NCF figure, the recent drop in occupancy suggests cash flows could decline in 2025, at least temporarily. As such, the Morningstar DBRS Value of $801.6 million derived at the last credit rating action in May 2024 was maintained for this review. That value is based on the Morningstar DBRS NCF figure of $55.9 million and a capitalization (cap) rate of 7.0%, which was increased from the 6.8% cap rate used in 2020 to reflect generally increased volatility for the office property types within the collateral portfolio.

Based on the Morningstar DBRS Value, the whole-loan, loan-to-value (LTV), inclusive of the mezzanine debt of $280.2 million, is 124.1%, and the LTV based on the total mortgage debt is 89.0%. Morningstar DBRS maintained its qualitative adjustments, totaling 1.50% for cash flow volatility because of stable occupancy; 2.50% for property quality because of the concentration of high-end hotels and well-positioned commercial properties benefiting from high traffic; and 2.0% for market fundamentals because of the concentrations in strong submarkets.

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 factor(s) 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 Morningstar DBRS credit rating assigned to Class B is higher than the result implied by the LTV Sizing Benchmarks by three or more notches. The variance is warranted given the underlying collateral's overall improved performance as compared with Morningstar DBRS' expectations when credit ratings were assigned in 2020, as well as the overall strength of the underlying portfolio in the desirable locations and high property quality.

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.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

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

DBRS, Inc.
22 West Washington Street
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
-- 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.