Morningstar DBRS Confirms Credit Ratings on All Classes of UBSCM 2018-NYCH Mortgage Trust

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on the Commercial Mortgage Pass-Through Certificates, Series 2018-NYCH issued by UBSCM 2018-NYCH Mortgage Trust (the Trust) as follows:

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

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the underlying hotel portfolio since Morningstar DBRS' previous credit rating action in June 2024. Since that time, the loan transferred to special servicing in August 2024 ahead of its November 2024 maturity date due to imminent maturity default. The loan was subsequently extended three months to February 2025 to allow the borrower additional time to market the property for the sale. As part of the modification, the borrower paid the loan down by $5.0 million, marking the third modification since 2021. Cumulatively, the loan modifications resulted in a principal repayment of $25.0 million. According to the servicer, the loan is under contract for sale to a third party; however, the borrower requested additional time to close on the sale. The special servicer granted the borrower an additional 90-day forbearance to May 2025 subject to the borrower curing outstanding interest, including default interest from loan maturity through the payoff date, and a $250,000 forbearance fee. Morningstar DBRS expects that the borrower will likely request an additional short-term extension to the forbearance period as the sale date appears to have been delayed. If talks between the sponsor and the servicer break down completely and the Trust ultimately undertakes a liquidation of the portfolio, Morningstar DBRS expects that the rated classes in the transaction would be insulated from losses with a cushion of approximately $35.0 million in the unrated Classes H and HRR, supporting the credit rating confirmations and Stable trends.

The subject transaction comprises an interest-only (IO), floating-rate loan, collateralized by the borrower's fee-simple interest in seven limited-service and extended-stay hotels in New York City, totaling 1,087 rooms. As of the April 2025 remittance, the Trust has a balance of $275.0 million representing a collateral reduction of 8.3% since issuance. There have been no hotel property releases to date. Additional debt held outside the Trust includes a subordinated mezzanine loan totaling $85.0 million.

The seven hotels are in Manhattan submarkets that typically have active lodging demand: Times Square (three hotels), the Financial District (two hotels), and Chelsea (one hotel) and Herald Square (one hotel) submarkets. The midmarket hotels are flagged with well-known brands including Hampton Inn (three hotels), Holiday Inn Express (two hotels), Holiday Inn (one hotel), and Candlewood Suites (one hotel). At issuance, occupancy rates at the properties ranged from 90.0% to 95.0% with average daily rates (ADRs) ranging from $198 to $229 per room. The previous sponsor invested $15.2 million ($13,983 per room) to undergo a portfoliowide property improvement plan prior to issuance. As of the April 2025 reporting, approximately $14.6 million was held across capital improvement and other reserve accounts.

According to the March 2025 STR, Inc. reports, the portfolio reported weighted-average (WA) occupancy, ADR, and RevPAR figures of 85.6%, $226, and $194 in the trailing 12-month period (T-12) ended February 2025, respectively, compared with figures of 82.2%, $225, and $185, respectively, for the YE2024 figures. According to the most recent financials, the net cash flow (NCF) for the T-12 period ended November 30, 2024, was $25.1 million with a debt service coverage ratio (DSCR) of 1.26 times (x) compared with $25.5 million at YE2023 with a DSCR of 1.07x.

Given the collateral's relatively stable performance, Morningstar DBRS maintained the value of $293.6 million derived in 2024, representing a 22.7% decline from the October 2024 appraised value of $380.0 million and a 49.4% decline from the appraised value of $580.7 million at issuance. The value was based on Morningstar DBRS' NCF of $25.0 million, derived from a 2.0% haircut to the YE2023 NCF, and a Morningstar DBRS capitalization rate of 8.5%. The Morningstar DBRS Value reflects a loan-to-value ratio (LTV) of 93.7% across the senior debt and a whole-loan LTV of 122.6%, including an $85.0 million mezzanine loan held outside the Trust. Morningstar DBRS maintained positive qualitative adjustments totaling 0.5% to account for generally high cash flow volatility and healthy market fundamentals. The Morningstar DBRS Value of $293.6 million represents a slight decline from the 2018 Morningstar DBRS Value of $313.7 million when the credit ratings were assigned; principal paydown of $25.0 million associated from prior maturity extensions granted by the special servicer offset the value decline.

As a test of the durability of the credit ratings, given the uncertainty associated with the transfer to special servicing, Morningstar DBRS conducted a hypothetical liquidation scenario based on the updated Morningstar DBRS Value derived in June 2024. The liquidation scenario factors in current outstanding advances, projected future advances, and on-hand reserves. Morningstar DBRS' analysis suggests that the transaction is insulated from loss; however, if the sale falls through or the property is subject to future value declines, the Morningstar DBRS-rated certificates have an additional cushion of $35.0 million in the unrated Class H and HRR certificates.

The credit rating on Class D is lower than the result suggested by Morningstar DBRS' LTV Sizing Benchmarks. The variance is warranted given the uncertain loan-level event risk. While recent performance remains in line with Morningstar DBRS' expectations at the last review, the subject loan is now past due its fully extended maturity date of February 2025 and past its 90-day forbearance period of May 2025.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024): https://dbrs.morningstar.com/research/454196

Classes X-NCP is an interest-only (IO) certificate that references 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 credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

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

The principal methodology is North American CMBS Surveillance Methodology (February 28, 2025), https://dbrs.morningstar.com/research/448963

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- North American Single-Asset/Single-Borrower Ratings Methodology (February 28, 2025),
https://dbrs.morningstar.com/research/448962
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024),
https://dbrs.morningstar.com/research/439702
-- Legal Criteria for U.S. Structured Finance (December 3, 2024),
https://dbrs.morningstar.com/research/444064
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024),
https://dbrs.morningstar.com/research/438283
-- Interest Rate Stresses for U.S. Structured Finance Transactions (March 27, 2025),
https://dbrs.morningstar.com/research/450750

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.