DBRS Morningstar Confirms All Ratings on CSAIL 2018-CX11 Commercial Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed the following ratings on the Commercial Mortgage Pass-Through Certificates, Series 2018-CX11 issued by CSAIL 2018-CX11 Commercial Mortgage Trust:

-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class X-D at BBB (high) (sf)
-- Class D at BBB (sf)
-- Class E-RR at BBB (low) (sf)
-- Class F-RR at BB (low) (sf)
-- Class G-RR at B (high) (sf)

All trends are Stable. In addition, DBRS Morningstar removed the Interest in Arrears designation on Class E-RR, F-RR, and G-RR.

The rating confirmations reflect the overall stable performance of the transaction since the last review. At issuance, the trust consisted of 56 fixed-rate loans secured by 118 commercial and multifamily properties with a total trust balance of $952.9 million. According to the December 2021 remittance report, 55 loans remain in the trust with a total trust balance of $914.5 million, representing a collateral reduction of 4.0% since issuance. The pool is relatively diverse based on loan size with the largest 15 loans comprising 60.1% of the trust balance. Five loans, representing 16.3% of the trust balance, exhibited credit characteristics consistent with investment-grade shadow ratings at issuance. Nine loans, representing 22.3% of the trust balance, are located in urban markets with DBRS Morningstar Market Ranks of 6 or greater. Nineteen loans, representing 44.6% of the trust balance, are structured with interest-only (IO) payments for the full term. An additional 14 loans, representing 23.0% of the trust balance, are structured with partial IO payments.

According to the December 2021 remittance report, one loan, representing 2.8% of the trust balance, is in special servicing after the underlying collateral was negatively affected by the Coronavirus Disease (COVID-19) pandemic. An additional 16 loans, representing 29.1% of the trust balance, are on the servicer’s watchlist, including five of the largest 15 loans by loan balance.

The Hilton Clearwater Beach Resort and Spa loan (Prospectus ID#2, 6.2% of the pool) is secured by the borrower’s leasehold interest in a 416-key full-service hotel located in Clearwater Beach, Florida. The loan was added to the servicer’s watchlist in April 2020 as a result of the borrower requesting coronavirus relief. Forbearance was granted in October 2020 in the form of a deferral of reserve payments between October 2020 and March 2021 and the allowance of reserve accounts to be available for debt service payments. The forbearance requires all reserves to be replenished by March 2022. Property performance has improved significantly in 2021, led by an 87.9% increase in departmental revenue, which resulted in a Q3 2021 debt service coverage ratio (DSCR) of 3.06 times (x) compared with the YE2020 DSCR of 1.16x. According to the year-to-date August 2021 STR data, the subject occupancy is above the competitive set at 83.8% with a penetration rate of 105%. While the subject’s ADR and RevPAR penetration lag behind the competitive set at 85.1% and 83.9%, respectively, the subject has demonstrated higher year-over-year growth in ADR and RevPAR rates when compared to the competitive set. The subject benefits from its superior beach frontage and flagship Hilton amenities. Although property performance has rebounded, DBRS Morningstar will continue to monitor for developments and any potential disruptions related to the Omicron variant.

The 6-8th West 28th Street loan (Prospectus ID#13, 2.8% of the pool) is secured by the fee interest in a 26,600 square-foot mixed-use building between Broadway and Fifth Avenue in Manhattan. The loan transferred to special servicing in June 2020 after coronavirus relief was requested, and the last loan payment was made in March 2020. The lender is actively pursuing foreclosure; however, such proceedings have been temporarily halted due to the foreclosure moratorium in place in New York. According to the servicer, the legislation and court have stayed the foreclosure and receivership action until January 2022. The August 2020 appraisal value was reported at $29.1 million, down 28.1% from the appraised value of $40.5 million at issuance. The loan-to-value (LTV) ratio increased to 89.3% from 64.2% based on that updated appraised value. For the purposes of this analysis, the loan was liquidated from the trust based on the August 2020 appraised value, which resulted in an implied loss severity in excess of 20%.

At issuance, DBRS Morningstar assigned an investment-grade shadow rating to One State Street (Prospectus ID#3, 5.4% of the trust balance), Moffett Towers II – Building 2 (Prospectus ID#9, 3.3% of the trust balance), Northrop Grumman Portfolio (Prospectus ID#11, 2.7% of the trust balance), Lehigh Valley Mall (Prospectus ID#12, 2.8% of the trust balance), and Yorkshire & Lexington Tower (Prospectus ID#15, 2.2% of the trust balance). With this review, DBRS Morningstar confirmed that the performances of these loans remain in line with the investment-grade shadow ratings.

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, and X-D 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.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#2 – Hilton Clearwater Beach Resort and Spa (6.2% of the pool)
-- Prospectus ID#13 – 6-8th West 28th Street (2.8% of the pool)

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 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.

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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