Morningstar DBRS Downgrades Eight Classes of Benchmark 2022-B35 Mortgage Trust

DBRS, Inc. (Morningstar DBRS) downgraded the credit ratings on eight classes of Commercial Mortgage Pass-Through Certificates, Series 2022-B35 issued by Benchmark 2022-B35 Mortgage Trust as follows:

-- Class E to BB (high) (sf) from BBB (low) (sf)
-- Class F to BB (low) (sf) from BB (high) (sf)
-- Class G to B (low) (sf) from BB (low) (sf)
-- Class H to CCC (sf) from B (high) (sf)
-- Class X-D to BBB (low) (sf) from BBB (sf)
-- Class X-F to BB (sf) from BBB (low) (sf)
-- Class X-G to B (sf) from BB (sf)
-- Class X-H to CCC (sf) from BB (low) (sf)

In addition, Morningstar DBRS confirmed the following credit ratings:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3-1 at AAA (sf)
-- Class A-3-2 at AAA (sf)
-- Class A-4-2 at AAA (sf)
-- Class A-4-1 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (high) (sf)
-- Class X-A at AAA (sf)

Morningstar DBRS changed the trends on Classes E, F, G, X-D, X-F, and X-G to Stable from Negative. Classes H and X-H now have a credit rating that does not typically carry a trend in Commercial Mortgage-Backed Securities (CMBS) credit ratings. The trends on all other classes are Stable.

The credit rating downgrades reflect increased loss projections for the pool stemming from the two loans in special servicing, Industry RiNo Station (Prospectus ID#7, 5.4% of the pool) and One Jackson Place (Prospectus ID#21, 1.3% of the pool). At the time of the last credit rating action in August 2024, Morningstar DBRS changed the trends on Classes X-D, E, X-F, F, X-G, G, X-H, and H to Negative from Stable, reflecting the transaction's high concentration of office-backed loans, some of which were showing signs of distress at the time. Two of those identified loans have since transferred to the special servicer in the first half of 2025. Both loans are secured by distressed office properties with occupancy rates below 50%, indicating a prolonged time to achieve stabilization. Morningstar DBRS analyzed both loans with liquidation scenarios, applying conservative haircuts to their issuance-appraised values. Morningstar DBRS' loss projections for these loans totaled $42.7 million, wiping out nearly the entire balance of the unrated Class J, when accounting for the transaction's 5.0% vertical risk retention piece. Morningstar DBRS' projected losses contributed to a considerable decline in credit support to the junior-most classes, which are exacerbated by the transaction's capital stack structure, which, after the liquidation analysis, only has $44.2 million in the noninvestment-grade category, supporting the credit rating downgrades with this review.

As of the May 2025 remittance all of the original 37 loans remain in the pool with a marginal collateral reduction of only 0.3% of the pool since issuance. There are no defeased loans and only two loans in special servicing. There are three loans, representing 5.5% of the pool on the servicer's watchlist; however, only one is watchlisted for performance-related concerns. The transaction has a considerable exposure to loans backed by office properties, comprising 44.1% of the pool, followed by industrial-backed loans at 16.6% of the pool. Morningstar DBRS notes the transaction's high office concentration is a potential risk, with several loans exhibiting high loan-to-value (LTV) ratios in stressed scenarios. Morningstar DBRS will continue to monitor the performance of these loans as they season and as tenant leases roll over. However, term risk remains low given the majority of these loans have maturities in 2032 and continue to perform in line with expectations at issuance, supporting the Stable trends.

The largest loan in special servicing is Industry RiNo Station, which is secured by a 177,687-sf office complex in the Midtown submarket of Denver. The loan transferred to the special servicer in March 2025 for payment default stemming from a significant decline in occupancy over the past three years. Given the recent transfer, the special servicer is still evaluating different possible workout strategies; however, a receiver has been appointed as of April 2025. As of the September 2024 rent roll, the subject was 78% occupied, compared with the 95% at issuance. Further occupancy decline remains a concern as rollover through the first half of 2026 totals 43.0% of the NRA. This includes the largest tenant, OneTrust LLC (21.3% of the NRA, lease expiry in July 2025), which no longer lists this address as a location on its website. The decline in occupancy has caused downward pressure on net cash flow (NCF), which was reported at $3.6 million, with a 1.14 times (x) debt service coverage ratio (DSCR) as per the annualized September 2024 (T-9) operating statement analysis report (OSAR), compared with the Morningstar DBRS issuance derived figures of $4.5 million and 1.42x, respectively. Morningstar DBRS expects financial performance to continue to deteriorate through 2025. The subject continues to report high rollover in the next 12 months with all leases scheduled to expire by March 2027. According to Reis, the Midtown submarket of Denver reported a 15.6% vacancy rate in Q1 2025, which has increased from the Q1 2024 figure of 15.4%. Given all these concerns, Morningstar DBRS' analyzed this loan under a liquidation scenario based on a 60% haircut to the issuance appraised value of $97.5 million. Inclusive of the outstanding advances and expected servicer expenses, the resulting loan loss severity was approaching 60.9% or approximately $36.6 million.

The second loan in special servicing, One Jackson Place, is secured by a 221,421-sf Class A office tower in downtown Jackson, Mississippi. The loan transferred to the special servicer in May 2025 for imminent nonmonetary default stemming from the borrower not wanting to replace the roof for a tenant who sent a default notice with intent to vacate. The loan remains current as of the May 2025 remittance; however, according to the December 2024 rent roll, the occupancy has declined to 43.72%, compared with the year-end (YE) 2023 occupancy of 75.84%. This decrease is primarily attributed to the departures of Molina Healthcare (formerly 25.5% of the NRA) and Carrol Warren (7.6% of the NRA). The occupancy declines have already caused performance to fall with the YE2024 financials reporting NCF and DSCR of $1.1 million and 1.39x, respectively, compared with $1.5 million and 1.93x at YE2023. While the DSCR remains above breakeven, the figure does not fully represent the occupancy decline and is expected to decline further if the borrower is unable to backfill the vacant space. The cash sweep associated with Molina healthcare's departure should collect approximately $2.4 million to help facilitate leasing at the subject. The submarket however is distressed, with Reis reporting a Q1 2025 vacancy rate of 29.3% for the CBD Jackson submarket. Given the borrower is already unwilling to fund a roof repair, it appears unlikely it will want to continue funding debt service out of pocket if performance were to fall below breakeven. For these reasons, Morningstar DBRS' analysis for the loan included a liquidation scenario based on a 60% haircut to the issuance appraised value of $23.6 million. Inclusive of the outstanding advances and expected servicer expenses, the resulting loan loss severity is approaching 45% and just in excess of $6.0 million.

At issuance, Morningstar DBRS shadow-rated an additional two loans, ILPT Logistics Portfolio (Prospectus ID#3, 6.6% of the pool) and 601 Lexington Avenue (Prospectus ID#19, 1.5% of the pool), as investment grade. For this review, Morningstar DBRS confirms that loan performance trends remain in line with investment-grade characteristics as supported by strong sponsorship strength and the historically stable performance of those two loans.

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

Classes X-A, X-D, X-F, X-G, and X-H 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 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.

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 CMBS Multi-Borrower Rating Methodology (April 09, 2025)/North American CMBS Insight Model v 1.3.0.0: https://dbrs.morningstar.com/research/451739
-- 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/44406
-- 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.