Fitch Ratings has downgraded two classes and affirmed 13 classes of Benchmark 2018-
The Rating Outlook on class F-RR is Negative.
RATING ACTIONS
Entity / Debt
Rating
Prior
BMARK 2018-B8
A-2 08162UAT7
LT
AAAsf
Affirmed
AAAsf
A-3 08162UAU4
LT
AAAsf
Affirmed
AAAsf
A-4 08162UAV2
LT
AAAsf
Affirmed
AAAsf
A-5 08162UAW0
LT
AAAsf
Affirmed
AAAsf
A-S 08162UBA7
LT
AAAsf
Affirmed
AAAsf
A-SB 08162UAX8
LT
AAAsf
Affirmed
AAAsf
B 08162UBB5
LT
AA-sf
Affirmed
AA-sf
C 08162UBC3
LT
A-sf
Affirmed
A-sf
D 08162UAC4
LT
BBBsf
Affirmed
BBBsf
Page
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VIEW ADDITIONAL RATING DETAILS
KEY RATING DRIVERS
Increased Loss Expectations; Office Performance Declines: The downgrades to classes F-RR and G-RR reflect increased loss expectations since Fitch's prior rating action, primarily due to the performance deterioration of the 3 Huntington Quadrangle loan (4.6% of the pool). Fitch's current ratings incorporate a base case loss of 5.40%.
Fitch has identified seven loans as Fitch Loans of Concern (FLOCs; 26.7% of pool). No loans are currently in special servicing. The Negative Outlook on class F-RR reflects the potential for downgrade should the performance of the FLOC's further deteriorate, loss expectations increase, and/or loans transfer to special servicing.
Largest Contributors to Loss: The largest contributor to loss, and largest increase in loss expectations since Fitch's prior rating action, is the 3 Huntington Quadrangle loan (4.6%), which is secured by a 409,000-sf suburban office property located in
The loan has remained current since issuance, however NOI DSCR is low at 0.98x as of YTD
The next largest contributor to loss is the Saint Louis Galleria loan (5.4%) which is secured by a 466,000sf portion of a 1.18 million sf regional mall located in
Property NOI has declined since issuance, with YE 2021 NOI approximately 29% below the issuers underwritten NOI and 12% below YE 2020. The NOI declines are mainly attributed to lower revenues since the pandemic, with YE 2021 revenue 19.5% below YE 2019. The partial interest-only loan (60-months) NOI DSCR reported at 1.68x as of YE 2021. Based on fully amortizing payments and YE 2021 NOI, DSCR equates to 1.22x compared to 1.72x per the issuers underwritten NOI.
According to
Fitch's base case loss of 17% reflects an 11.50% cap rate and a 5% stress to the YE 2021 NOI.
The third largest contributor to loss is the 590
Fitch base case loss of 8.9% reflects an 8.75% cap rate and a 15% stress to the YE 2021 NOI, which equates to approximately a value of
Minimal Change to Credit Enhancement (CE): As of the
Twenty-three loans (57.5%) are full-term interest-only (IO), and six loans (10.5%) remain in their partial IO periods.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Sensitivity factors that lead to downgrades include an increase in pool level losses from underperforming or specially serviced loans. Downgrades to the senior classes, along with class B, are not expected given the overall stable performance of the pool, their position in the capital structure and sufficient CE, but may occur if interest shortfalls occur or losses increase considerably.
A downgrade to classes C, D, and E-RR would occur should several loans transfer to special servicing and/or as expected pool losses significantly increase.
Further downgrades to class F-RR would occur should the performance of the FLOCs continue to deteriorate, and/or loans transfer to special servicing.
Further downgrades to the distressed class G-RR would occur as losses are realized or become more certain and/or as losses materialize and CE becomes eroded.
Fitch has identified both a baseline and a worse-than-expected, adverse stagflation scenario based on fallout from the
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Sensitivity factors that lead to upgrades would include stable to improved asset performance coupled with paydown and/or defeasance.
Upgrades to classes B and C would likely occur with significant improvement in CE and/or defeasance. However, adverse selection, increased concentrations or the underperformance of a particular loan(s) may limit the potential for future upgrades.
An upgrade to classes D and E-RR are considered unlikely and would be limited based on the sensitivity to concentrations or the potential for future concentrations. Classes would not be upgraded above 'Asf' if there were a likelihood for interest shortfalls.
Upgrades to classes F-RR and G-RR are not likely until the later years of the transaction, and only if the performance of the FLOCs improve significantly, and/or if there is sufficient CE, which would likely occur if the non-rated class is not eroded and the senior classes pay off.
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.
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