Fitch Ratings has affirmed 13 classes of BANK 2018-BNK10 Commercial Mortgage Pass-Through Certificates, Series 2018-BNK10.

RATING ACTIONS

Entity / Debt

Rating

Prior

BANK 2018-BNK10

A-3 065404AY1

LT

AAAsf

Affirmed

AAAsf

A-4 065404BA2

LT

AAAsf

Affirmed

AAAsf

A-5 065404BB0

LT

AAAsf

Affirmed

AAAsf

A-S 065404BC8

LT

AAAsf

Affirmed

AAAsf

A-SB 065404AZ8

LT

AAAsf

Affirmed

AAAsf

B 065404BD6

LT

AA-sf

Affirmed

AA-sf

C 065404BE4

LT

A-sf

Affirmed

A-sf

D 065404AA3

LT

BBB-sf

Affirmed

BBB-sf

E 065404AC9

LT

BB-sf

Affirmed

BB-sf

Page

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VIEW ADDITIONAL RATING DETAILS

KEY RATING DRIVERS

Overall Stable Performance and Loss Expectations: Overall pool performance has remained relatively stable since Fitch's prior rating action. The majority of loans previously affected by the pandemic have stabilized. Fitch has identified five Fitch Loans of Concern (FLOCs; 7.8% of the pool balance) primarily due to deteriorating performance and upcoming rollover concerns. No loans are in special servicing. Fitch's current ratings incorporate a base case loss of 3.8%.

The largest contributor to loss expectations, Warwick Mall loan (2.2% of the pool), is secured by an approximately 588,000-sf regional mall located in Warwick, RI. The loan sponsorship consists of Bliss Properties, Lane Family Trust and Mark T. Brennan. This FLOC was flagged for its secondary market regional mall location, continued performance recovery from the pandemic and refinance concerns. The mall reopened in June 2020 after being closed in March due to the pandemic. Non-collateral anchors include Macy's and Target. Major collateral tenants include JCPenney (23.4% NRA expiring March 2030), Jordan's Furniture (19.3%, extending for five years through December 2026), Nordstrom Rack (6.4%, November 2022) and Old Navy (3.8%, January 2026). Showcase Cinema (9.7%) vacated when its lease expired in April 2021); however, the borrower has since re-leased the space to Apple Cinemas on a 15-year term which began in November 2021, with the theater opened in March 2022. Occupancy was 96% as of June 2022, compared with 94% occupied in June 2021.

Recent tenant sales were requested from the master servicer, but not provided; the latest available inline sales were $499 psf as of TTM June 2017. Fitch's base case loss has increased to 31%, reflecting a 20% cap rate and 5% stress to the YE 2021 NOI, and factors a higher loss recognition due to anticipated refinance concerns at maturity.

The second largest contributor to loss expectations and largest increase in loss since Fitch's prior rating action is the One Newark Center loan (2.7%), secured by a portion of a 418,000-sf office property located in the Newark CBD. The loan's collateral consists of floors 6-22 of an office building and an attached parking garage. Floors 1-5 are owned and occupied by Seton Hall Law School.

Occupancy declined to 68% as of June 2022 from 94% in December 2020 due to a number of tenants vacating in 2021 and 2022. Global Crossing (8% of NRA) vacated upon its 2021 lease expiration, while Sedgwick (6% of NRA) vacated prior to its 2025 lease expiration. Additionally, K&L Gates reduced its space to 26,074 sf (6.2% of NRA) from 52,148 sf (12.5% of NRA).

The loan has remained current, however NOI DSCR is low reporting at 1.07x as of YTD June 2022, down from 1.33x at YE 2021, 2.30x at YE 2020, and 2.87x at YE 2019. Fitch's analysis includes a 25% haircut and 9% cap rate to the YE 2021 NOI to reflect declining occupancy, upcoming lease rollover and high submarket vacancy resulting in a 24% modeled loss.

The third largest contributor to loss expectations, Roedel Hotel Portfolio loan (3.2%), is secured by three hotels: two Hilton Garden Inns and one Holiday Inn Express. Portfolio performance was impacted by the pandemic, but continues to show signs of recovery. The portfolio NOI has significantly improved since the pandemic lows, but remains 23% below the issuers underwritten NOI. NOI DSCR has improved to 1.49x as of TTM June 2022 compared with 1.11x at YE 2021 and 0.44x at YE 2020. Collateral occupancy was 62% as of TTM June 2022 compared with 61% as of YE 2021, and 75% at issuance. Fitch's analysis reflects a 11.50% cap rate and a 5% stress to the TTM June 2022 NOI resulting in a 7% modeled loss.

Minimal Change to Credit Enhancement (CE): As of the November 2022 distribution date, the pool's aggregate balance has been paid down by 3.4% to $1.24 billion from $1.29 billion at issuance. Two loans (7.4%) are defeased. Twenty-four loans representing 55.4% of the pool are full-term interest-only loans. Thirteen loans (21.9%) have a partial, interest-only component; nine loans representing 14% of the pool have begun to amortize. The pool is scheduled to amortize by 7.4% of the initial pool balance by maturity.

Property Type Concentration: The highest concentration is office (25.4%), followed by retail (22.6%), self-storage (21.8%), hotel (13.4%) and multi-family (7.6%).

Pari Passu Loans: Eight loans (29.4% of pool) are pari passu.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Sensitivity factors that could lead to downgrades include an increase in pool-level losses from underperforming loans/assets.

Downgrades to 'AAAsf' and 'AA-sf' are not likely due to the continued expected amortization, position in the capital structure and sufficient CE relative to loss expectations, but may occur should interest shortfalls affect these classes.

Downgrades to 'A-sf' and 'BBB-sf' would occur should expected losses for the pool increase substantially, with continued underperformance of the FLOCs and/or the transfer of loans to special servicing.

Downgrades to 'BB-sf' would occur should loss expectations increase as FLOC performance declines or fails to stabilize.

Fitch has identified both a baseline and a worse-than-expected, adverse stagflation scenario based on fallout from the Russia-Ukraine war whereby growth is sharply lower amid higher inflation and interest rates; even if the adverse scenario should play out, Fitch expects virtually no impact on ratings performance, indicating very few rating or Outlook changes. However, for some transactions with concentrations in underperforming retail exposure, the ratings impact may be mild to modest, indicating some changes on sub-investment grade notes.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

Sensitivity factors that could lead to upgrades include stable to improved asset performance, coupled with additional paydown and/or defeasance.

Upgrades to classes B, C and X-B may occur with significant improvement in CE and/or defeasance, and with the stabilization of performance on the FLOCs; however, adverse selection and increased concentrations could cause this trend to reverse. The class would not be upgraded above 'Asf' if there were any likelihood of interest shortfalls.

Upgrades to classes D, X-D, E and X-E are not likely until the later years in the transaction and only if the performance of the remaining pool is stable and/or there is sufficient CE to the bonds.

Best/Worst Case Rating Scenario

International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg

Additional information is available on www.fitchratings.com

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