BMARK 2018-B1 ratings affirmed as Fitch keeps negative outlook on five classes

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BMARK 2018-B1 ratings affirmed

Highlights

Fitch Ratings affirmed BMARK 2018-B1 ratings due to performance and loss expectations aligning with prior actions, but maintained negative outlooks on five classes.
The Valencia Town Center loan's balance dropped by 44.4% after a $22.6 million paydown, yet loss expectations remain high due to expected vacancy and adverse lease terms.
Fitch warns of possible further downgrades if large loans like 90 Hudson, Worldwide Plaza, and Valencia Town Center underperform or if specially serviced loans and collateral values worsen.

Loan performance and rating drivers

As reported by Fitch Ratings, the affirmations reflect performance and loss expectations that remain in line with the prior rating action. The agency says the pool benefits from a significant principal curtailment on the specially serviced Valencia Town Center loan, which now accounts for 3.9% of the pool after a $22.6 million paydown in May 2026 reduced its balance by 44.4%.

The paydown moves Valencia Town Center from the third-largest loan at the time of the prior review to the 12th largest, with the curtailment resulting from the distribution of loan reserves to the trust. Fitch says negative outlooks on classes A-M, B, C, X-A and X-B continue to reflect the pool's 22.6% concentration of specially serviced loans and 35.5% exposure to office properties.

Since the previous review, 156-168 Bleecker and Tri State Neighborhood Center, which had represented 4.1% and 1.1% of the balance at the prior review, liquidated with realized losses of 50.5% and 80.0%, respectively. Those losses exceed Fitch's earlier expected losses of 43.0% and 64.9%, respectively.

Office exposure and further downgrade risk

The largest contributor to loss expectations since the prior rating action is the 90 Hudson loan, which represents 9.4% of the transaction and is secured by a 432,284-square-foot office property in Jersey City, New Jersey, built in 1999. Fitch's loss expectation of 61.1% uses the most recent appraisal, which is about 74.3% below the issuance appraisal value and implies a recovery value of $128 per square foot.

The second-largest contributor to expected losses is Valencia Town Center, a 395,483-square-foot mixed-use property in Santa Clarita, California, secured by a leasehold interest. Fitch says the ground lease runs until 2115 with no extension options, while fixed ground rent rises 3% annually from 2026 through 2045 after earlier stepped increases.

Property performance at Valencia Town Center deteriorates materially after the downsizing of Princess Cruise Lines, which previously occupied about 73.2% of net rentable area and is expected to vacate its remaining space at lease expiration. Fitch says its 'Bsf' rating case loss, before concentration adjustments, assumes a full loss on the remaining balance because of the property's significant vacancy and the burden of the ground lease.

Further downgrades remain possible if the performance of the largest fixed-rate loans, especially 90 Hudson, Worldwide Plaza and Valencia Town Center, fails to stabilize or deteriorates further. Fitch also says additional pressure could emerge if collateral values fall further, specially serviced loans face extended workout periods, or more loans default at or before maturity.

Our earlier coverage of Fitch’s rating of Hainan Rubber’s proposed subordinated perpetual securities explained how the notes’ junior ranking in the capital structure and coupon-deferral flexibility shaped the BBB- assessment. We also outlined Fitch’s view of the group’s leverage and liquidity profile, including reliance on funding access supported by its government-related status and the role of its Halcyon Agri unit in the financing plan.

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