DBRS Morningstar Assigns Ratings to CSWF Trust 2018-TOP

DBRS, Inc. (DBRS Morningstar) assigned ratings to the Commercial Mortgage Pass-Through Certificates, Series 2018-TOP issued by CSWF Trust 2018-TOP (the Issuer) as follows:

-- Class A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (high) (sf)
-- Class D at A (low) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (sf)
-- Class H at B (low) (sf)

All trends are Stable.

These certificates are currently also rated by DBRS Morningstar’s affiliated rating agency, Morningstar Credit Ratings, LLC (MCR). In connection with the ongoing consolidation of DBRS Morningstar and MCR, MCR previously announced that it had placed its outstanding ratings of these certificates Under Review–Analytical Integration Review and that MCR intended to withdraw its outstanding ratings; such withdrawal will occur on or about May 11, 2020. In accordance with MCR’s engagement letter covering these certificates, upon withdrawal of MCR’s outstanding ratings, the DBRS Morningstar ratings will become the successor ratings to the withdrawn MCR ratings. Information about the MCR ratings, including the history of the MCR ratings, can be found at www.morningstarcreditratings.com.

On March 1, 2020, DBRS Morningstar finalized its “North American Single-Asset/Single-Borrower Ratings Methodology” (the NA SASB Methodology), which presents the criteria for which ratings are assigned to and/or monitored for North American single-asset/single-borrower (NA SASB) transactions, large concentrated pools, rake certificates, ground lease transactions, and credit tenant lease transactions. For further information on the NA SASB Methodology, please see the press release dated March 1, 2020, on the DBRS Morningstar website at www.dbrsmorningstar.com.

The subject rating actions are the result of the application of the NA SASB Methodology in conjunction with the “North American CMBS Surveillance Methodology,” as applicable. Qualitative adjustments were made to the final loan-to-value (LTV) sizing benchmarks used for this rating analysis.

The transaction sponsor, TPG Real Estate’s TPG Real Estate Partners Fund II, used the collateral loan to acquire and recapitalize the fee simple and leasehold interests in a portfolio of 15 mostly single-tenant Class A office properties totaling 3.1 million square feet in 11 states. The loan facilitated the sponsor’s (1) buyout of Gramercy Property Trust’s (GPT) interest in Strategic Office Partners, a joint venture between the sponsor and GPT, and (2) its acquisition of four assets included in the portfolio. Since loan closing, three properties were released from the portfolio, which reduced the current loan balance to $410.4 million from the initial loan balance of $530 million. The sponsor applied these proceeds on a pro rata basis throughout the bond stack.

Major tenants in the portfolio include Amazon.com, Inc.; Microsoft Corporation; Wells Fargo; Bristol Myers Squibb Company; and Blue Cross Blue Shield. The assets are located primarily in secondary markets across the U.S., including Redmond, Washington; Charlotte, North Carolina; Tampa, Florida; San Bernardino, California; San Antonio, Texas; Tempe, Arizona; Chantilly, Virginia; Henderson, Nevada; Burbank, California; Lawrenceville, Georgia; and Nashville, Tennessee.

The DBRS Morningstar net cash flow (NCF) was reanalyzed for the subject rating action to confirm its consistency with the “DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria.” The NCF figure applied as part of the analysis reflects the release of three properties after issuance. DBRS Morningstar deducted its NCF for the released properties from its original NCF, resulting in a concluded NCF of $36.5 million, which represents a -4.5% variance from the Issuer’s NCF for the remaining properties.

DBRS Morningstar applied a cap rate at the middle of the DBRS Morningstar Cap Rate Ranges for secondary-market single-tenant office properties, reflecting the suburban locations. In addition, the 7.95% cap rate DBRS Morningstar applied is substantially above the implied cap rate of 5.2% based on the Issuer’s underwritten NCF and appraised value at issuance.

DBRS Morningstar made negative qualitative adjustments to the final LTV sizing benchmarks used for this rating analysis, totaling -4% to account for cash flow volatility, property quality, and market fundamentals.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for this transaction.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com The platform includes loan-level data for most outstanding CMBS transactions (including non-DBRS Morningstar-rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodologies are the North American Single-Asset/Single-Borrower Ratings Methodology and North American CMBS Surveillance Methodology, which can be found on www.dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on www.dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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