DBRS Morningstar Confirms All Ratings, Changes Trend on One Class of DBGS 2018-C1 Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2018-C1 issued by DBGS 2018-C1 Mortgage Trust as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class X-B at A (high) (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class X-D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class X-F at BB (sf)
-- Class F at BB (low) (sf)
-- Class G-RR at B (sf)

DBRS Morningstar changed the trend on Class G-RR to Negative from Stable. All other trends are Stable. The Negative trend reflects DBRS Morningstar’s concerns with the specially serviced loans, which make up 7.0% of the current pool, up from 1.9% in November 2020.

The rating confirmations reflect the transaction’s overall stable performance since issuance, when the transaction consisted of 37 fixed-rate loans secured by 102 commercial and multifamily properties, with a trust balance of $1.1 billion. According to the October 2021 remittance report, all loans remain in the pool and there has been an immaterial reduction in the trust balance since issuance given the limited amortization to date.

The transaction has a high concentration of office collateral, as 13 loans, representing 37.8% of the pool, are secured by office properties. The office sector has thus far shown greater resiliency to cash flow declines during the Coronavirus Disease (COVID-19) pandemic, although the full impact on the office segment remains to be seen as companies begin to have their employees return to offices. The remaining concentrations include 14 loans secured by retail collateral, representing 30.1% of the pool, and three loans secured by mixed-use collateral, representing 13.1% of the pool. Additionally, nine loans, representing 36.3% of the pool, were shadow-rated as investment grade at issuance. With this review, DBRS Morningstar confirms that the loans continue to perform in line with those shadow ratings.

According to the October 2021 remittance, seven loans, representing 19.1% of the pool, are currently on the servicer’s watchlist. These loans are being monitored for various reasons, including low debt service coverage ratios (DSCRs) or occupancy, delinquent taxes, tenant rollover risk, and/or pandemic-related forbearance requests. The largest loan on the watchlist is the TripAdvisor HQ loan (Prospectus ID#3, 7.1% of the pool), which is being monitored for delinquent taxes. In addition to the delinquent taxes, DBRS Morningstar remains concerned with the long-term health of the company, which has been severely affected by travel restrictions amid the coronavirus pandemic. TripAdvisor laid off 25% of its workforce and closed its offices in Boston and San Francisco as it attempted to cut costs throughout the pandemic. According to a news article from the Boston Herald in September 2020, TripAdvisor was attempting to sublease 100,000 square feet (sf) of its space at the collateral. It currently occupies all 280,000 sf at the subject on a lease through December 2030 with no termination options. DBRS Morningstar analyzed this loan with an elevated probability of default.

There are three loans, representing 7.0% of the pool, in special servicing. The largest specially serviced loan, Outlet Shoppes at El Paso (Prospectus ID#9, 3.5% of the pool balance), is an anchored retail outlet shopping center in Canutillo, Texas. The loan transferred to special servicing in November 2020 after the borrower's parent company, CBL Properties, filed for Chapter 11 bankruptcy. The property was 90.2% occupied according to the July 2021 rent roll, and YE2020 financials reported a DSCR of 1.47 times (x) compared with the YE2019 DSCR of 1.69x. The loan has remained current throughout the pandemic and, because of its proximity to the border, should benefit from increased traffic once the U.S./Mexico border is opened in November 2021. DBRS Morningstar analyzed this loan with an elevated probability of default.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Classes X-A, X-B, X-D, and X-F are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

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

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer 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 methodology is the North American CMBS Surveillance Methodology (March 26, 2021), which can be found on 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 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.

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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

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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