Morningstar DBRS Downgrades Credit Ratings on Six Classes of J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-ASH8, Changes Trend on One Class to Negative

DBRS, Inc. (Morningstar DBRS) downgraded its credit ratings on six classes of Commercial Mortgage Pass-Through Certificates, Series 2018-ASH8 issued by J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-ASH8 as follows:

-- Class A to AA (sf) from AAA (sf)
-- Class B to A (sf) from AA (low) (sf)
-- Class C to BBB (sf) from A (sf)
-- Class D to B (sf) from BBB (sf)
-- Class E to CCC (sf) from B (sf)
-- Class X-EXT to B (high) (sf) from BBB (high) (sf)

In addition, Morningstar DBRS confirmed the following credit ratings:

-- Class F at CCC (sf)

Morningstar DBRS changed the trend on Class B to Negative from Stable. Class F doesn't carry a trend, and Class E no longer has a trend given the class now has a rating that does not typically carry a trend in Commercial Mortgage-Backed Securities (CMBS) ratings. The trend on all remaining classes is Stable.

The credit rating downgrades reflect the deterioration in collateral performance as net cash flow (NCF) across the portfolio continues to decline. In its current credit analysis, Morningstar DBRS updated its loan-to-value ratio (LTV) sizing benchmarks as a result of the sustained declines in NCF, supporting the credit rating downgrades.

In 2020, when Morningstar DBRS originally assigned the credit ratings, it noted the NCF declines were initially believed to be partially related to the COVID-19 pandemic-related demand fluctuations, with the possibility that performance could improve over time. Since YE2022, however, there have been sustained year-over-year cash flow declines with the most recent servicer reported NCF figure of $19.0 million as of YE2024. In comparison, the YE2023 and YE2022 NCF figures were $24.5 million and $25.1 million, respectively. As a result, the YE2024 debt service coverage ratio (DSCR) declined to 0.65 times (x). The loan transferred to special servicing in March 2025 because of imminent monetary default with loan modification discussions currently ongoing between the borrower and servicer. The Negative trends assigned to Classes B, C, and D reflect the increased risk that performance may continue to deteriorate if the loan term is extended further, and Morningstar DBRS may stress the value further.

The $395.0 million mortgage loan is secured by the fee and leasehold interests in a portfolio of eight full-service hotels totaling 1,964 rooms across six states. There have been no property releases to date. The portfolio is primarily concentrated in California consisting of two hotels, Embassy Suites Santa Clara (257 rooms) and Hilton Orange County Costa Mesa (486 rooms), accounting for 33.7% of the allocated loan amount (ALA). There are also two properties in Florida: Embassy Suites Orlando Airport (174 rooms) and Key West Crowne Plaza La Concha (160 rooms), accounting for 22.24% of the ALA. The remaining hotels are spread across Oregon (276 rooms), Virginia (267 rooms), Minnesota (220 rooms), and Maryland (124 rooms).

A loan modification agreement was executed in April 2024, extending the maturity date to February 2025 with an additional one-year extension option subject to a minimum 8.0% debt yield. To execute the extension, the borrower paid the loan down by $10 million with an additional $10 million paid in October 2024. In February 2025, the borrower made known its intent to exercise the second, one-year extension option to extend loan maturity to February 2026; however, collateral performance did not meet the debt yield test. The servicer provided a one-month waiver to allow the borrower to make an additional loan curtailment to meet the test; however, the loan transferred to special servicing after the borrower did not pay down the loan for the required amount. Based on the YE2024 net operating income of $24.5 million, the borrower would have been required to pay the outstanding loan balance of $325.0 million down by approximately $19.2 million to meet the 8.0% debt yield test. As of May 2025 reporting, the loan is current on debt service payments with $2.3 million held across all reserve accounts.

Portfolio NCF decreased 22.4% between YE2024 and YE2023 driven by an increase in operating expenses with General and Administrative, Repairs and Maintenance, and Insurance cumulatively accounting for a year-over-year (YOY) increase of $3.9 million. Operating costs across the portfolio also rose significantly YOY, up $3.3 million. The portfolio's consolidated occupancy rate of 68.0% at YE2024 was consistent with the YE2023 figure of 69.4%. The reported YE2024 consolidated portfolio revenue per available room (RevPAR) of $134.52 also remained consistent with the YE2023 figure of RevPAR of $132.47 and the $133.49 figured concluded to by Morningstar DBRS in 2020.

At the previous credit rating action in July 2024, Morningstar DBRS downgraded its credit ratings on Classes E and F and changed the trends on Classes C, D, E, and X-EXT to Negative from Stable to reflect the increased credit risk as exhibited in the downward pressure in the LTV sizing benchmarks following updates to the analysis. This included an updated Morningstar DBRS NCF of $259.9 million based on a haircut to the YE2023 figure. In its analysis for this review, Morningstar DBRS updated its LTV Sizing Benchmark, resulting in a collateral value of $201.7 million based on Morningstar DBRS' NCF of $18.6 million, derived from a 2.0% haircut to the YE2024 NCF and a capitalization rate of 9.2%. The Morningstar DBRS value reflects an LTV of 161.1%. Morningstar DBRS also maintained positive qualitative adjustments to the LTV sizing benchmarks totaling 1.00% to reflect positive market fundamentals for select properties in the portfolio.

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, or Governance factors 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 (May 16, 2025): https://dbrs.morningstar.com/research/454196

Class X-EXT is an interest-only (IO) certificate 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 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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The Morningstar DBRS Long-Term Obligation Rating Scale definition indicates that credit ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' outlooks and credit ratings are monitored.

DBRS, Inc.
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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
-- Interest Rate Stresses for U.S. Structured Finance Transactions (March 27, 2025): https://dbrs.morningstar.com/research/450750
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024): https://dbrs.morningstar.com/research/438283

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