Fitch Ratings has affirmed all classes of DBGS 2018-BIOD Mortgage Trust.

The Rating Outlooks remain Stable.

RATING ACTIONS

Entity / Debt

Rating

Prior

DBGS 2018-BIOD

A 23306GAA5

LT

AAAsf

Affirmed

AAAsf

B 23306GAC1

LT

AA-sf

Affirmed

AA-sf

C 23306GAE7

LT

A-sf

Affirmed

A-sf

D 23306GAG2

LT

BBB-sf

Affirmed

BBB-sf

Page

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VIEW ADDITIONAL RATING DETAILS

KEY RATING DRIVERS

Generally Stable Performance: The affirmations reflect the generally stable performance of the underlying portfolio. As of September 2023, the servicer-reported portfolio occupancy increased to 84.8% from 78.8% at Fitch's prior rating action. The improved occupancy is largely attributed to the Ardentech Court and Bridgeway II properties. Previously unoccupied, both properties secured tenants for the entirety of their NRA.

Novo Nordisk vacated its space at the 500 Fairview Avenue property (22% of the individual property NRA) and the 530 Fairview Avenue property (54%) in March 2024. The portfolio faces upcoming lease expirations, with 11.4% rolling in 2024, 7% in 2025 and 5.1% in 2026. Fitch's updated sustainable net cash flow of $53.5 million remains generally in line with the prior rating action, as the portfolio has benefited from new leasing and rent bumps for existing tenants, which has offset some lease rollover.

Since issuance, three properties (6.8% of the allocated loan amount [ALA] at issuance) have been released from the pool, resulting in pro-rata principal pay down of $62.5 million to the classes.

High-Quality Assets in Strong Locations: The portfolio is collateralized by a pool of high-quality lab office properties in desirable and in-fill life science submarkets. The majority of the portfolio is located in a top life science market, including San Francisco, CA; San Diego, CA; and Cambridge, MA. At issuance, the portfolio received a weighted average Fitch property quality grade of 'A-'/'B+', and approximately 70% of the properties were built or renovated since 2000.

Portfolio Diversity: The portfolio is collateralized by the fee (19 properties) and leasehold (one property) interests in 19 lab office properties with a total of 2.1 million sf and one parking structure, located across six states and seven distinct markets. The portfolio also exhibits strong tenant diversity as it features over 50 distinct tenants, with no individual tenant representing more than 17% of base rental income.

Single Tenant Property Exposure: Approximately 37% of the portfolio's base rent is derived from properties leased to single tenants. Lincoln Centre is the largest single tenant property, accounting for approximately 17% of the portfolio's base rent; this property is a Class-A campus built in 2017 that is fully leased to Illumina Inc. (BBB/Rating Watch Negative) through January 2033.

High Aggregate Leverage: The Fitch debt service coverage ratio (DSCR) and loan-to-value (LTV) for the $662.5 million mortgage loan are 0.85x and 105.3%, respectively, compared to 0.87x and 103.1% at the last rating action. At issuance, the mortgage loan was $725 million, with a Fitch DSCR and LTV of 0.89x and 100.6%, respectively. Fitch maintained an 8.25% capitalization rate since issuance.

The total debt package includes $218 million in mezzanine financing, resulting in a Fitch DSCR and LTV on the total debt of 0.64x and 139.9%, respectively, compared to 0.65x and 137% at the last rating action. At issuance, the total debt package included $235 million of mezzanine financing, with Fitch DSCR and LTV of 0.67x and 133.2%.

Increase in Supply: According to market reports, 21 million square feet of life sciences space is expected to come online in 2024, with approximately 80% of the construction set to be completed in the top three life science markets which make up almost 90% of the ALA in the portfolio. The increase in supply could increase vacancy rates and lower rents.

Limited Structural Features and Interest Only: Ongoing reserves for taxes, insurance, ground rent and leasing costs will only be collected during a cash sweep period triggered by an event of default, a bankruptcy of the borrower or the debt yield falling below 6.50% for the first three extension terms, 6.75% during the fourth extension option and 7.00% during the fifth extension option. In addition, the loan is structured as interest-only during its entire term. The excess cash flow sweep may be substituted by a guaranty from the guarantor (BRE Edison Holdings, L.P.). The loan is in its fourth of five extension periods.

Pro Rata Release Provisions/Stable Credit Enhancement: The borrower is permitted to release individual properties from the portfolio, such that the first 25% of the released properties' ALA will be paid pro rata to the certificate holders. However, this requires a release premium of 105% of the ALA to be paid down in connection with any property releases until the first 25% of the loan balance has been repaid, with a release premium of 110% of the ALA thereafter.

Additionally, property releases are not permitted unless the remaining pool, following any property release, satisfies a debt yield test. This is in place to mitigate the risk that the collateral of the remaining pool may be of lesser quality. Specifically, property releases will not be permitted unless the debt yield following any release is equal to the greater of the closing date debt yield or the debt yield immediately prior to the release. The closing date debt yield was 7.42%.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

A significant and sustained deterioration in portfolio occupancy and/or Fitch NCF.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

A significant and sustainable improvement in Fitch NCF as well as stable to improved portfolio occupancy.

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

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.

Additional information is available on www.fitchratings.com

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