Morningstar DBRS Confirms Credit Ratings on All Classes of BANK 2018-BNK10

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2018-BNK10 issued by BANK 2018-BNK10 as follows:

-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class X-B at A (high) (sf)
-- Class C at A (sf)
-- Class X-D at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class X-E at BB (sf)
-- Class E at BB (low) (sf)
-- Class X-F at B (sf)
-- Class F at B (low) (sf)

All trends are Stable.

The credit rating confirmations reflect the transaction's overall stable performance, which remains in line with Morningstar DBRS' expectation since the previous credit rating action in July 2024. Overall, the pool continues to exhibit healthy credit metrics as evidenced by the strong weighted-average (WA) debt service coverage ratio (DSCR) of 2.2 times (x) and the healthy WA loan-to-value ratio (LTV) of 57.4% based on the most recent financial reporting available. In addition, the 15 largest loans, representing 60.3% of the current pool balance, continue to report stable to improving cash flows with a WA debt yield of 11.4%.

As of the June 2025 remittance, 64 of the original 68 loans remained in the trust with an aggregate principal balance of $1.21 billion, representing a collateral reduction of 6.2% since issuance. To date, two loans, representing 7.6% of the current pool balance, have been defeased. There are 15 loans, representing 32.7% of the current pool balance, on the servicer's watchlist; however, only nine of those loans, representing 18.8% of the pool balance, are being monitored for upcoming tenant rollover risk or performance-related concerns. Loans secured by office collateral represent 25.5% of the current pool balance followed by retail, self-storage, hotel, and multifamily representing 22.8%, 14.9%, 13.0%, and 12.2%, respectively.

Although the pool has a meaningful concentration of loans secured by office properties, two of those loans, representing 11.1% of the current pool balance, are shadow-rated investment grade and continue to benefit from long-term, investment-grade tenancy and healthy performance metrics with DSCRs higher than 2.5x. In addition, the transaction benefits from a sizable unrated first loss certificate with a remaining balance of almost $40.0 million. To date, the trust has incurred a total loss of $1.3 million, contained to the unrated Class G certificate.

The largest loan on the servicer's watchlist that is being monitored for a performance-related reason is Wisconsin Hotel Portfolio (Prospectus #4; 5.2% of the current pool balance), which comprises 11 limited-service and extended-service hotels totaling 1,225 rooms across Wisconsin. Operating performance continues to lag pre-pandemic levels, and the loan was most recently added to the servicer's watchlist in March 2025 for a low DSCR. According to financial reporting for the trailing 12-month (T-12) period ended March 31, 2025, the portfolio reported an average daily rate, revenue per available room (RevPAR), and occupancy rate of $112.81, $63.41, and 56.44%, respectively--largely unchanged from YE2023. However, net cash flow (NCF) increased to $4.8 million with a DSCR of 0.88x in the T-12 period ended March 31, 2025, an increase of approximately 62% from the NCF of $2.9 million with a DSCR of 0.54x at YE2023. The increase in NCF was primarily driven by a decrease in total operating expenses. According to the servicer, the sponsor's plan for additional performance improvement is to further reduce operating expenses rather than to increase occupancy and daily rates. Although the portfolio's performance improved year over year, cash flows remain significantly below issuance expectations; as such, Morningstar DBRS applied a probability of default (POD) adjustment in its analysis, resulting in an expected loss (EL) that is approximately 2.0x higher than the pool's EL.

The One Newark Center loan (Prospectus ID#12; 2.6% of the current pool balance) is secured by a 417,932-square foot (sf) Class A office tower and an adjacent 10-story parking garage in Newark, New Jersey. The loan was added to the servicer's watchlist in May 2022 following a decline in DSCR and occupancy levels after several tenants vacated or reduced their footprints at or prior to their respective lease expiration dates. The property generated NCF of $3.4 million with a DSCR of 0.87x as of YE2024 compared with the NCF of $3.9 million with a DSCR of 1.0x at YE2023 and $6.0 million with a DSCR of 1.52x at issuance. The decline in cash flow was driven by reduced revenue and increased operating expenses. According to the YE2024 rent roll, the property was 71.8% occupied, which is relatively unchanged since 2021. Although the sponsor signed several new leases and the occupancy rate is expected to increase to 75.9% in the near to moderate term, there is upcoming tenant rollover risk with leases representing slightly more than 13.0% of the net rentable area scheduled to roll within the next 12 months. Per Reis, the Newark office submarket had a vacancy rate of 17.2% as of Q1 2025. Given the upcoming tenant rollover risk and the borrower's historical challenges with backfilling vacant space at the property--a factor that is further exacerbated by soft submarket fundamentals--Morningstar DBRS analyzed this loan with stressed LTV and POD assumptions, resulting in a loan EL more than 4.0x higher than the pool's EL.

In addition to these loans, Morningstar DBRS identified several other loans exhibiting increased credit risk due to performance declines since issuance. The 2020 Southwest 4th Avenue loan (Prospectus ID #8; 3.7% of the current pool balance) is secured by a 226,815-sf Class A office facility in Portland, Oregon. The property's occupancy decreased to 69.1% at YE2024, down from 87.3% at issuance, primarily because the largest tenant, CH2M Hill, reduced its space by 35,304 sf. The loan continues to cover debt service obligations with a DSCR of 2.02x as of YE2024. The servicer contacted the borrower for a leasing update and, as of the date of this press release, a response remains pending. The Courtyard Los Angeles Sherman Oaks loan (Prospectus ID #14; 2.3% of the current pool balance) is secured by a 213-key full-service hotel property in Sherman Oaks, California. This loan is currently on the servicer's watchlist for a low DSCR. The YE2024 RevPAR and DSCR figures of $132.31 and 0.88x, respectively, lag the pre-pandemic figures and are lower than the previous year's figures of $154.84 and 1.56x, respectively. As a result, Morningstar DBRS applied an elevated POD penalty to both 2020 Southwest 4th Avenue and Courtyard Los Angeles Sherman Oaks loans leading to ELs nearly 5.0x and 3.0x higher, respectively, than the pool's EL.

At issuance, Morningstar DBRS shadow-rated two loans, Apple Campus 3 (Prospectus ID#1; 7.8% of the current pool balance) and Moffett Towers II (Prospectus ID#10; 3.3% of the current pool balance), as investment grade. With this review, Morningstar DBRS maintained the shadow ratings on these loans as they continue to perform in line with investment-grade characteristics.

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.

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 (May 16, 2025) https://dbrs.morningstar.com/research/454196.

Classes X-A, X-B, X-D, X-E, and X-F 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 (28 February 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.

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 17g-7 disclosure report and/or the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

As applicable, 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 600
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 Commercial Mortgage Servicer Rankings (August 23, 2024),
https://dbrs.morningstar.com/research/438283
-- 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 CMBS Multi-Borrower Rating Methodology (April 9, 2025)/ North American CMBS Insight Model v 1.3.0.0,
https://dbrs.morningstar.com/research/451739

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.