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New York, September 09, 2022 — Moody’s Investors Service, (“Moody’s”) has affirmed the ratings on five classes in Citigroup Commercial Mortgage Trust 2018-C5, Commercial Mortgage Pass-Through Certificates Series 2018-C5 as follows:
Cl. A-3, Affirmed Aaa (sf); previously on Nov 19, 2019 Affirmed Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Nov 19, 2019 Affirmed Aaa (sf)
Cl. A-AB, Affirmed Aaa (sf); previously on Nov 19, 2019 Affirmed Aaa (sf)
Cl. A-S, Affirmed Aa3 (sf); previously on Nov 19, 2019 Affirmed Aa3 (sf)
Cl. X-A*, Affirmed Aa1 (sf); previously on Nov 19, 2019 Affirmed Aa1 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings on the P&I classes were affirmed because of their credit support and 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 the IO class was affirmed based on the credit quality of the referenced classes.
Moody’s rating action reflects a base expected loss of 2.9% of the current pooled balance, compared to 4.5% at Moody’s last review. Moody’s base expected loss plus realized losses is now 2.5% of the original pooled balance, compared to 4.5% at the last review. 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 "US and Canadian Conduit/Fusion Commercial Mortgage-Backed Securitizations Methodology” published in July 2022 and available at https://ratings.moodys.com/api/rmc-documents/391056. The methodologies used in rating interest-only classes were "US and Canadian Conduit/Fusion Commercial Mortgage-Backed Securitizations Methodology” published in July 2022 and available at https://ratings.moodys.com/api/rmc-documents/391056 and “Moody’s Approach to Rating Structured Finance Interest-Only (IO) Securities” published in February 2019 and available at https://ratings.moodys.com/api/rmc-documents/59126. 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 https://ratings.moodys.com for a copy of these methodologies.
DEAL PERFORMANCE
As of the August 12, 2022 distribution date, the transaction’s aggregate certificate balance has decreased by 15.7% to $563.2 million from $668.2 million at securitization. The certificates are collateralized by 38 mortgage loans ranging in size from less than 1% to 11.5% of the pool, with the top ten loans (excluding defeasance) constituting 52.6% of the pool. One loan, constituting 10.7% of the pool, has an investment-grade structured credit assessment. Five loans, constituting 13.3% of the pool, have defeased and are secured by US government securities.
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 18 compared to 21 at Moody’s last review.
As of the August 2022 remittance report, loans representing 89.3% were current or within their grace period on their debt service payments and 10.7% were beyond their grace period but less than 30 days delinquent.
Eleven loans, constituting 28.9% of the pool, are on the master servicer’s watchlist, of which two loans, representing 1.8% of the pool, indicate the borrower has received loan modifications in relation to the coronavirus impact on the property. 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 and no loans are currently in special servicing.
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 2021 operating results for 97% of the pool, and full or partial year 2022 operating results for 32% of the pool (excluding specially serviced and defeased loans). Moody’s weighted average conduit LTV is 115%, compared to 114% 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 21.1% to the most recently available net operating income (NOI), excluding hotel properties that had significantly depressed NOI in 2021. Moody’s value reflects a weighted average capitalization rate of 10.0%.
Moody’s actual and stressed conduit DSCRs are 1.63X and 0.97X, respectively, compared to 1.83X and 0.96X 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 loan with a structured credit assessment is the 65 Bay Street Loan ($60 million – 10.7% of the pool), which represents a pari-passu portion of a $100 million senior mortgage. The loan is secured by a 52-story, Class A multifamily property located in Jersey City, NJ. The property is also encumbered with a $100 million b-note. The building was completed in 2016 and features 447 apartment units. The property also contains 17,459 square feet (SF) of retail space that is 100% leased to four tenants. There is also a six level parking garage consisting of 624 parking spaces. The property was 96% leased as of June 2022 compared to 96% in December 2019 and 94% at securitization. The property experienced a slight decline in NOI during 2020 and 2021, primarily driven by higher operating expenses, but performance has since improved. Moody’s structured credit assessment and stressed DSCR are baa1 (sca.pd) and 1.24X, respectively.
The top three conduit loans represent 20.4% of the pool balance. The largest loan is the 636 11th Avenue loan ($65 million – 11.5% of the pool), which represents a pari-passu portion of a $240 million loan. The loan is secured by a fee simple interest in an 11-story, Class A office building located in New York, NY. The property is part of the Hell’s Kitchen neighborhood of Manhattan and spans the entire eastern side of the block facing 11th Avenue between West 46th Street and 47th Streets. The building was originally developed as a chocolate factory in 1917, and was converted to Class A office space in 2008. The property serves as the corporate headquarters of The Ogilvy Group, Inc. (100% of the net rentable area (NRA)), with lease expiration in June 2029. Due to the single tenant exposure, Moody’s value incorporated a Lit/Dark analysis. Moody’s LTV and stressed DSCR are 116% and 0.91X, respectively, the same as at last review.
The second largest loan is the 236 Atlantic Avenue Loan ($25 million – 4.4% of the pool), which is secured by a borrower’s fee simple interest in the lower levels of a five-story mixed-use building in Brooklyn, NY. The entire building is comprised of 42 residential condominiums on floors two through five, 20,395 SF of ground-floor retail, and a 130-space parking garage. The borrower acquired the property in 2008 as a part of an assemblage, invested $18.0 million to develop the residential and commercial portions of the building, and sold off the residential units. Only the ground-floor retail and the parking garage serve as collateral for the subject loan. The property was 100% leased as of December 2021. Moody’s LTV and stressed DSCR are 126% and 0.73X, respectively.
The third largest loan is the 650 South Exeter Street Loan ($25 million – 4.4% of the pool), which is secured by the borrower’s fee simple condominium interest in the Class A office and garage components of an urban mixed-use complex located in the Harbor East Neighborhood of Baltimore, MD. Collateral for the loan also includes a 26,300 SF, freely releasable theater. The property was 33% occupied as of March 2022 compared to 83% in December 2020. The former largest tenant, Laureate Education (50.1% of NRA), exercised its termination option and vacated the property in June 2022. Additionally, the second largest tenant, Morgan Stanley (16.4% NRA), notified the borrower they would not renew their lease and vacated at lease expiration in August 2022. The servicer commentary indicated that the borrower has a letter of intent from a potential tenant to backfill the Morgan Stanley space. As of the August 2022 remittance, this loan is current on P&I payments. Moody’s LTV and stressed DSCR are 116% and 1.01X, respectively.
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 on https://ratings.moodys.com/rating-definitions.
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 issuer/deal page for the respective issuer on https://ratings.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 https://ratings.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://ratings.moodys.com/documents/PBC_1288235.
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 https://ratings.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on https://ratings.moodys.com.
Please see https://ratings.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 issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.
Musab Jehangir
Associate Lead Analyst
Structured Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
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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
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