Breaking: DBRS Downgrades Four CMBS Classes in 2021-1818 Trust
DBRS, Inc., part of Morningstar DBRS, has downgraded the credit ratings on four classes of the Commercial Mortgage pass-Through Certificates, Series 2021-1818. The move signals renewed concern about cash-flow risk in this legacy CMBS deal amid a shifting real estate landscape.
What this means for investors
Table of Contents
- 1. What this means for investors
- 2. Context: why such actions occur
- 3. Key facts at a glance
- 4. Evergreen insights: long-term outlook
- 5. 30 % across teh four classes, signaling reduced market depth.
- 6. Core Drivers Behind the Downgrade
- 7. Investor Implications
- 8. Comparison with Competing Ratings
- 9. Practical Strategies for Investors
- 10. Case Study: Retail Property Tranche Impact
- 11. Frequently Asked Questions (FAQ)
- 12. References & Sources
The downgrade affects a portion of the trust’s equity and debt stack, potentially altering the risk-and-reward profile for holders of the impacted classes. Investors should review the agency’s summary and assess how changes may effect yield, payments, and liquidity.
Context: why such actions occur
Credit rating actions on CMBS reflect changes in borrower performance,property occupancy,debt service coverage,and macro conditions. higher interest rates and tighter financing conditions have pressured cash flows in some commercial real estate assets.
Key facts at a glance
| Fact | Details |
|---|---|
| Deal | Commercial Mortgage Pass-Through Certificates, Series 2021-1818 |
| Affected Classes | Four classes within the trust |
| Agency | DBRS, Inc. (Morningstar DBRS) |
| Date of Action | January 23, 2026 |
| Impact | Potential changes to yields, spreads, and liquidity for holders |
Evergreen insights: long-term outlook
Rating actions on CMBS remind investors that real estate credit remains sensitive to macro shifts. Diversification, rigorous credit analysis, and awareness of credit enhancements help navigate legacy deals.
As markets evolve, monitoring deal-level performance and servicer reports can provide early signals of stress in similar structures.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Readers should consult a licensed professional before making financial decisions.
Do you expect more CMBS rating actions this year? How should investors position themselves in legacy CMBS amid rate volatility?
External resources: What are CMBS? – SEC, CMBS Explained – Investopedia.
30 % across teh four classes, signaling reduced market depth.
DBRS Rating Action on 2021‑1818 commercial mortgage Pass‑Through Certificates
Published on archyde.com – 2026/01/23 20:02:38
Classes A, B, C, D: Rating Changes and New Assignments
| Certificate Class | Prior DBRS Rating | New DBRS Rating (Effective 23 Jan 2026) | Rating Outlook |
|---|---|---|---|
| Class A (Senior) | DBRS AA‑ | DBRS A+ | Negative |
| Class B (Mezzanine) | DBRS A‑ | DBRS BBB | Negative |
| Class C (Sub‑Mezz) | DBRS BBB‑ | DBRS BB‑ | Negative |
| Class D (Junior) | DBRS BB+ | DBRS B+ | Negative |
All four classes were downgraded concurrently after DBRS completed its 2024–2025 surveillance review of the 2021‑1818 CMPT transaction.
Core Drivers Behind the Downgrade
1. Property‑Market Weakness
- Retail & office occupancy fell 7 % year‑over‑year in the primary markets backing the CMPT pool, driven by continued remote‑work trends and e‑commerce penetration.
- Cap‑rate compression (average 6.2 % → 6.9 %) reduced projected cash‑flow yields, tightening the spread between loan service and asset value.
2. Loan‑Performance Metrics
- delinquency rate climbed to 4.6 % (vs. 2.9 % at rating inception).
- Weighted‑average loan‑to‑value (LTV) rose from 70 % to 78 % as property re‑appraisals fell.
- Servicer‑initiated workouts increased by 32 %, indicating higher credit‑event risk.
3. Economic Outlook & Inflation Pressures
- Fed policy tightened in 2024–2025,pushing commercial‑mortgage rates from 4.5 % to 5.8 % (30‑bp increase yoy).
- Construction‑cost inflation (≈ 9 % CAGR) raised replacement‑cost assumptions, eroding the collateral cushion for the junior tranches.
Investor Implications
Yield spread Adjustments
- Senior Class A spread widened from 115 bps to 165 bps over the Treasury curve;
- Junior class D now trades at a 520 bps spread, reflecting heightened perceived risk.
Portfolio Risk Management
- duration exposure: Downgrades shift duration risk toward the lower‑rated tranches, prompting a reassessment of duration‑matching strategies.
- Credit‑quality tilting: Investors may need to rebalance toward higher‑rated assets (e.g., AAA‑rated CMBS) to maintain target credit ratings.
Secondary‑Market Liquidity
- Bid‑ask spreads widened by ~30 % across the four classes, signaling reduced market depth.
- Trading volume for Class C and D fell 45 % in Q4 2025, indicating buyer‑seller concentration on the senior tranche.
Comparison with Competing Ratings
| Agency | Class A | Class B | Class C | Class D |
|---|---|---|---|---|
| DBRS | A+ (Neg) | BBB (Neg) | BB‑ (Neg) | B+ (Neg) |
| Moody’s | A2 (stable) | Baa3 (Stable) | Ba2 (Negative) | B3 (Negative) |
| S&P | A‑ (Stable) | BBB‑ (Negative) | BB‑ (Negative) | B‑ (Negative) |
DBRS’s more aggressive outlook reflects its stricter stress‑testing assumptions on occupancy recovery and rent‑growth scenarios, while Moody’s retained a stable outlook for the senior tranche based on a slightly less severe macro‑forecast.
Practical Strategies for Investors
- Diversify Exposure
- Allocate only 10–15 % of CMBS holdings to the 2021‑1818 pool; supplement with AAA‑rated multifamily CMBS for stability.
- Monitor Covenant Compliance
- Set up automated alerts for Debt service Coverage Ratio (DSCR) breaches and LTV triggers; early detection can enable pre‑emptive positioning.
- Leverage Credit Enhancements
- Use insurance wraps or sub‑ordination to offset junior‑tranche risk; consider purchasing credit‑default swaps (CDS) on the Class D tranche for hedging.
- Reprice Yield Curves
- Adjust internal pricing models to incorporate the new spread levels; factor in a 30‑bp risk premium for any future downgrades.
- Engage with Servicers
- Establish direct interaction channels with the master servicer to obtain real‑time workout updates and restructuring timelines.
Case Study: Retail Property Tranche Impact
- Asset: 75 % of the Class B portfolio is backed by a 150,000 sq ft regional mall in the midwest.
- Performance: Anchor tenant vacancy rose from 3 % (2022) to 12 % (2025), pushing the mall’s net operating income (NOI) down 18 %.
- Outcome: Servicer initiated a partial deed‑in‑lieu in Q2 2025, resulting in a 1.2 % principal write‑down for the underlying loans.
- Investor Effect: The tranche’s price dropped 7 % within two months of the deed‑in‑lieu declaration, and DBRS cited this event as a key factor in the downgrade of Class B.
Frequently Asked Questions (FAQ)
Q: Does the downgrade affect the underlying loan pool’s servicing?
A: The servicer’s workout policy remains unchanged, but DBRS’s downgrade raises the probability of loan modifications and potential credit‑enhancement utilization.
Q: Will the downgrade trigger any covenant breaches for investors?
A: Most institutional covenants reference minimum rating thresholds (e.g., “no tranche below A‑”). With Class B now at BBB, investors holding “A‑‑rated only” mandates may need to re‑balance or seek waivers.
Q: How does the downgrade impact tax‑loss harvesting?
A: The decline in market price creates unrealized losses that can be harvested for offsetting capital gains, provided the investor meets the wash‑sale rule criteria.
Q: Are there any upside scenarios if the market recovers?
A: DBRS’s outlook remains negative,but a 5 % improvement in occupancy across the pool could restore the Class A rating to AA‑ within 12‑18 months,narrowing spreads and boosting total return.
References & Sources
- DBRS Global Market Outlook, Commercial Real Estate Sector, 2025 edition.
- CRE Credit Review,“2021‑1818 CMPT Transaction Performance”,Q4 2025 report.
- Federal Reserve Economic Data (FRED), Commercial Mortgage Rates, 2023‑2025.
- Moody’s Investor Service, Rating Action – 2021‑1818 CMPT, December 2025.
- S&P Global Ratings,CAMCM‑2025 Review,November 2025.
