Fitch Ratings has downgraded two classes and affirmed 13 classes of Benchmark 2018-B8 Mortgage Trust.

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 Melville, NY. The loan has been identified as a FLOC due to significant occupancy declines, falling to 73% per the June 2022 rent roll, from 94% at YE 2019. The decline in occupancy is attributed to Travelers Indemnity, previously 29% of the NRA, vacating at its July 2020 lease expiration. A cash flow sweep has been in place since Travelers renewal notice period expired in May 2019. The largest remaining tenant is Northwell Health (30% NRA; lease expiring September 2028).

The loan has remained current since issuance, however NOI DSCR is low at 0.98x as of YTD June 2022 and 1.03x as of YE 2021, compared with 1.67x at YE 2020. Fitch's modelled loss of approximately 35% reflects a 10% cap rate off the YE 2021 NOI, with credit applied for the loan remaining current. The Fitch stressed value is approximately $61 psf.

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 Saint Louis, MO. The non-collateral anchors are Dillard's, Macy's and Nordstrom. The largest collateral tenants are Galleria-6 Cinemas (4.2% NRA) and H&M (2.8% NRA). Per servicer reporting, occupancy has recently improved to 100% as of YE 2021, after temporarily falling to 87% as of September 2021 from 95.7% at YE 2020. Fitch has an outstanding request to the servicer for an updated recent roll, but has not received one to date.

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 Green Street, in-line tenant sales reported at $728psf/$615psf (excluding Apple) as of July 2022, exceeding pre-pandemic levels. This is an improvement from the most recent servicer provided tenant sales reported for TTM ended September 2021 at $523psf/$401psf (excluding Apple) and $364psf/$294psf (excluding Apple) at YE 2020. Fitch has an outstanding request to the servicer for a more recent tenant sales report.

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 East Middlefield (4.8%) loan, which is secured by a 100,000sf suburban office located in Mountain View, CA, 15 miles NW of San Jose. The loan has been flagged as a FLOC due to the single-tenant Omnicell intentions to vacate at its upcoming October 2022 lease expiration. A cash flow sweep has been activated, and exceeds $2.6 million (approx. $26psf) as of June 2022. Per servicer updates, the borrower is in discussion with several potential tenants.

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 $400 psf.

Minimal Change to Credit Enhancement (CE): As of the September 2022 distribution date, the pool's aggregate principal balance was reduced by 3.1% to $1.01 billion from $1.05 billion at issuance. There have been no realized losses to date. Interest shortfalls of $32,629 are currently affecting the non-rated class NR-RR.

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 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 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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