Approximately $704.8 million of structured securities affected
New York, November 25, 2020 -- Moody's Investors Service, ("Moody's") has affirmed the ratings
on seven classes in Morgan Stanley Capital I Trust 2018-L1 ("MSC
2018-L1"), Commercial Mortgage Pass Through Certificates,
Series 2018-L1 as follows:
Cl. A-1, Affirmed Aaa (sf); previously on Oct
28, 2018 Definitive Rating Assigned Aaa (sf)
Cl. A-2, Affirmed Aaa (sf); previously on Oct
28, 2018 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed Aaa (sf); previously on Oct
28, 2018 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Oct
28, 2018 Definitive Rating Assigned Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Oct
28, 2018 Definitive Rating Assigned Aaa (sf)
Cl. A-S, Affirmed Aa3 (sf); previously on Oct
28, 2018 Definitive Rating Assigned Aa3 (sf)
Cl. X-A*, Affirmed Aaa (sf); previously on
Oct 28, 2018 Definitive Rating Assigned Aaa (sf)
*Reflects Interest-Only Class
RATINGS RATIONALE
The ratings on six principal and interest (P&I) classes were affirmed
due to their credit support and because the transaction's key metrics,
including Moody's loan-to-value (LTV) ratio, Moody's
stressed debt service coverage ratio (DSCR) and the transaction's
Herfindahl Index (Herf), are within acceptable ranges.
The rating on one interest-only (IO) class, Cl. X-A,
was affirmed based on the credit quality of its referenced classes.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to disrupt
economies and credit markets across sectors and regions. Our analysis
has considered the effect on the performance of commercial real estate
from the current weak US economic activity and a gradual recovery for
the coming months. Although an economic recovery is underway,
it is tenuous and its continuation will be closely tied to containment
of the virus. As a result, the degree of uncertainty around
our forecasts is unusually high. Stress on commercial real estate
properties will be most directly stemming from declines in hotel occupancies
(particularly related to conference or other group attendance) and declines
in foot traffic and sales for non-essential items at retail properties.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
Moody's rating action reflects a base expected loss of 6.9%
of the current pooled balance. Moody's base expected loss plus
realized losses is now 6.9% of the original pooled balance.
Moody's provides a current list of base expected losses for conduit
and fusion CMBS transactions on moodys.com at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's forward-looking
view of the likely range of performance over the medium term. Performance
that falls outside the given range can indicate that the collateral's
credit quality is stronger or weaker than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a significant
amount of loan paydowns or amortization, an increase in the pool's
share of defeasance or an improvement in pool performance.
Factors that could lead to a downgrade of the ratings include a decline
in the performance of the pool, loan concentration, an increase
in realized and expected losses from specially serviced and troubled loans
or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating all classes except interest-only
classes was "Approach to Rating US and Canadian Conduit/Fusion CMBS" published
in September 2020 and available at https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_1244778.
The methodologies used in rating interest-only classes were "Approach
to Rating US and Canadian Conduit/Fusion CMBS" published in September
2020 and available at https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_1244778
and "Moody's Approach to Rating Structured Finance Interest-Only
(IO) Securities" published in February 2019 and available at https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_1111179.
Please see the list of ratings at the top of this announcement to identify
which classes are interest-only (indicated by the *).
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of these methodologies.
DEAL PERFORMANCE
As of the November 18, 2020 distribution date, the transaction's
aggregate certificate balance has decreased by 0.6% to $895.2
million from $900.6 million at securitization. The
certificates are collateralized by 47 mortgage loans ranging in size from
less than 1% to 6.7% of the pool, with the
top ten loans (excluding defeasance) constituting 49.9%
of the pool. Three loans, constituting 17.4%
of the pool, have investment-grade structured credit assessments.
Moody's uses a variation of Herf to measure the diversity of loan sizes,
where a higher number represents greater diversity. Loan concentration
has an important bearing on potential rating volatility, including
the risk of multiple notch downgrades under adverse circumstances.
The credit neutral Herf score is 40. The pool has a Herf of 28,
the same as at securitization.
As of the November 18, 2020 remittance report, loans representing
88.0% were current or within their grace period on their
debt service payments, 10.5% were less than one month
delinquent, and 1.5% were greater than 90 days delinquent.
Sixteen loans, constituting 42.2% of the pool,
are on the master servicer's watchlist. The watchlist includes
loans that meet certain portfolio review guidelines established as part
of the CRE Finance Council (CREFC) monthly reporting package. As
part of Moody's ongoing monitoring of a transaction, the agency
reviews the watchlist to assess which loans have material issues that
could affect performance.
No loans have been liquidated from the pool since securitization .
One loan, constituting 1.5% of the pool, is
currently in special servicing. The specially serviced loan is
The Shoppes at Chino Hills loan ($13.0 million -- 1.5%
of the pool), which represents a pari-passu portion of a
$110 million senior mortgage loan. The loan is secured by
a 378,676 square feet (SF) retail shopping center located in Chino
Hills, California. The loan transferred to special servicing
in July 2020 as a result of being delinquent in relation to the coronavirus
impact on the property. The loan modification was closed on October
29, 2020. As of March 2020, the property was 93%
occupied, slightly down from 95% in December 2019 and securitization.
Moody's has assumed a high default probability for two poorly performing
loan secured by retail properties located in Taylor, MI and Worcester,
MA, representing 0.9% of the pool. Both loans
are current and on the servicer's watchlist due to coronavirus related
hardships and low DSCR. Moody's has estimated an aggregate
loss of $4.5 million (21% expected loss on average)
from the troubled loans and specially serviced loan.
The credit risk of loans is determined primarily by two factors:
1) Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the severity
of loss upon a default, which is largely driven by each loan's loan-to-value
ratio, referred to as the Moody's LTV or MLTV. As described
in the CMBS methodology used to rate this transaction, we make various
adjustments to the MLTV. We adjust the MLTV for each loan using
a value that reflects capitalization (cap) rates that are between our
sustainable cap rates and market cap rates. We also use an adjusted
loan balance that reflects each loan's amortization profile.
The MLTV reported in this publication reflects the MLTV before the adjustments
described in the methodology.
Moody's received full year 2019 operating results for 97% of the
pool, and partial year 2020 operating results for 52% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 123%, compared to 118%
at Moody's last review. Moody's conduit component excludes loans
with structured credit assessments, defeased and CTL loans,
and specially serviced and troubled loans. Moody's net cash flow
(NCF) reflects a weighted average haircut of 15% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 10.3%.
Moody's actual and stressed conduit DSCRs are 1.48X and 0.91X,
respectively, compared to 1.52X and 0.93X at the last
review. Moody's actual DSCR is based on Moody's NCF and the loan's
actual debt service. Moody's stressed DSCR is based on Moody's
NCF and a 9.25% stress rate the agency applied to the loan
balance.
The largest loan with a structured credit assessment is the Aventura Mall
Loan ($60.0 million -- 6.7% of the pool),
which represents a pari-passu portion of a $1.4 billion
senior mortgage loan. The property is also encumbered with $343.3
million in junior B-notes. The loan is secured by the borrowers'
fee simple interest in 1,217,508 SF of the 2,160,350
SF three-level super-regional mall located in Aventura,
Florida, approximately one mile east of Interstate 95, approximately
17 miles north of Miami, FL and 12 miles southwest of Fort Lauderdale,
Florida. The property is the largest mall in the state of Florida
and contains five anchors comprised of Macy's, Bloomingdale's,
Macy's Men's and Home, J. C. Penney and Nordstrom.
The collateral for the loan includes the J. C. Penney anchor
space and the pad sites ground leased to the other four anchor tenants.
The property benefits from a large mix of luxury and mass market tenants
that appeal to a wide variety of shoppers. At securitization reported
sales for in-line tenants less than 10,000 SF were $1,665
PSF (including Apple) and $1,050 PSF (excluding Apple).
Property performance has been stable since securitization. As of
June 2020, the reported total occupancy was 94%, the
same as of December 2019, compared to 93% at securitization.
As of June 2020, the reported net operating income (NOI) DSCR was
2.0X, compared to 2.02X as of December 2019.
This loan is interest-only throughout the ten-year term.
Moody's structured credit assessment and stressed DSCR are aa3 (sca.pd)
and 1.1X, respectively.
The second loan with a structured credit assessment is the Millennium
Partners Portfolio loan ($55.7 million -- 6.2%
of the pool), which represents a pari-passu portion of a
$472.0 million senior mortgage loan. The property
is also encumbered with $238.0 million in subordinate debt
and $280.1 million in mezzanine financing. The loan
is secured by the borrowers' condominium interests in eight Class
A properties located in New York City (three assets), Washington
D.C (two), Boston (one), San Francisco (one),
and Miami (one). In aggregate, the collateral improvements
contain 1,549,699 SF of retail, office and/or parking
area. The portfolio is leased to a combination of national retail
tenants including Equinox sports clubs, AMC Loews movie theaters,
Primark, and Zara along with office tenants including Havas and
HSBC. As of March 2020, the portfolio was 100% leased,
the same as of December 2019 and December 2018. As of March 2020,
the portfolio net cash flow (NCF) DSCR was 2.43X, compared
to 2.45X as of December 2019 and 2.35X as of December 2018.
The loan is current as of November payment date and the properties are
located in highly desirable locations in markets with high barriers to
entry. The loan is currently on the servicer's watchlist.
This loan is interest-only throughout the ten-year term.
Moody's structured credit assessment and stressed DSCR on the pooled senior
note are aa3 (sca.pd) and 1.42X, respectively.
The third loan with a structured credit assessment is The Gateway loan
($40.0 million -- 4.5% of the pool),
which represents a pari-passu portion of a $330 million
senior mortgage loan. The property is also encumbered with $220
million in subordinate debt. The loan is secured by the borrower's
fee simple interest in a 1,254-unit high-rise and
townhome apartment complex located in San Francisco, California.
The property is situated within the Financial District of San Francisco,
just two blocks north of Embarcadero Center. As of March 2020,
the occupancy was 94%, compared to 97% as of December
2017 and 95% at securitization. Performance has been stable
since securitization. This loan is interest-only throughout
the ten-year term. Moody's structured credit assessment
and stressed DSCR on the pooled senior note are baa2 (sca.pd) and
1.03X, respectively.
The top three conduit loans represent 16.4% of the pool
balance. The largest loan is the Griffin Portfolio II Loan ($60.0
million -- 6.7% of the pool), which represents
a pari-passu portion of a $250 million first mortgage loan.
The loan is secured by the portfolio of the borrower's fee simple
interest in two industrial facilities and two office complexes located
in four different states: Alabama, Ohio, Nevada and
Illinois. All four properties are single-tenant occupied,
leased to Southern Company (The) (Baa2, Moody's senior unsecured
rating, stable outlook), Amazon.com, Inc.
(A2, senior unsecured, positive outlook), 3M Company
(A1, senior unsecured, negative outlook), and International
Game Technology (Ba3, senior unsecured, negative outlook).
As of June 2020, the portfolio was 100% leased, unchanged
since securitization. Performance has been stable since securitization.
Moody's LTV and stressed DSCR are 118% and 0.85X,
respectively, the same as at securitization.
The second largest loan is the Navika Six Portfolio Loan ($44.5
million -- 5.0% of the pool), which represents
a pari-passu portion of a $78.3 million first mortgage
loan. The loan is secured by the borrower's fee simple interest
in a portfolio of six hotels located across the following four states
-- California, New Jersey, Texas and Florida.
The loan is on the servicer's watchlist due to the coronavirus impact
on the property. As of June 2020, the portfolio reported
NOI DSCR of 0.97X, compared to 1.89X as of December
2019, and 2.10X as of December 2018. The borrower
had requested payment relief in relation to the coronavirus impact on
the property. The relief was granted and includes three months
of deferred FF&E reserves, and ability to utilize existing FF&E
reserves to cover three months of P&I payments. Moody's LTV
and stressed DSCR are 132% and 0.96X, respectively,
compared to 124% and 0.98X at securitization.
The third largest loan is the Offices at Mall of America Loan ($42.0
million -- 4.7% of the pool), which is secured
by the borrower's fee and leasehold interests in a 10-story
office building that sits atop three floors of retail space at the Mall
of America (the "Mall") located in Bloomington, Minnesota.
The Mall, which is not included as collateral for the loan,
is one of the largest indoor shopping malls in the United States,
has a gross area of approximately 4.2 million SF with approximately
2.8 million SF of retail and entertainment space, and attracts
approximately 40 million visitors annually. The collateral property
was built in late 2016 and offers 169,311 SF of Class A office space.
As of June 2020, the property was 85% leased, essentially
unchanged since securitization. The largest tenant is Cray,
which represents 52% of the net rentable area (NRA), with
the lease expiration in January 2030. Property performance has
been stable since securitization. Moody's LTV and stressed DSCR
are 145% and 0.79X, respectively, the same as
at securitization.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
The analysis includes an assessment of collateral characteristics and
performance to determine the expected collateral loss or a range of expected
collateral losses or cash flows to the rated instruments. As a
second step, Moody's estimates expected collateral losses or cash
flows using a quantitative tool that takes into account credit enhancement,
loss allocation and other structural features, to derive the expected
loss for each rated instrument.
Moody's did not use any stress scenario simulations in its analysis.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Dariusz Surmacz
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Romina Padhi
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
