Benchmark 2023-B38 Mortgage Trust Annual Report - How They Did This Year

What Exactly Is Benchmark 2023-B38 Mortgage Trust?

Benchmark 2023-B38 Mortgage Trust is not a regular company that sells products or services. Instead, it's a Commercial Mortgage-Backed Security (CMBS) Trust. The "2023" in its name shows its starting year. "B38" usually means a specific group of CMBS investments from that year.

The trust's main job is to package commercial property loans. Lenders like German American Capital, Goldman Sachs, JPMorgan Chase, and Citi Real Estate Funding lend money. They finance owners of large business properties like offices or malls. Instead of keeping these loans, lenders group them. They then sell parts of these loan pools to trusts like Benchmark 2023-B38.

Investors in this trust buy into many different commercial property loans. The trust then sells various types of certificates, much like bonds. Property owners make mortgage payments. The trust uses this money to pay principal and interest to certificate holders. Payments follow each certificate's specific rank and rules. This report covers the trust's performance for the year ending December 31, 2025.

What Loans Does the Trust Hold?

Benchmark 2023-B38 Mortgage Trust owns parts of 12 important commercial property loans. These loans often use "pari passu" participations. This means several trusts can own equal parts of the same loan. Spreading investments across many loans and property types helps lower risk for you. Here are some big loans that made up a large part of the trust's first investments:

• Pacific Design Center Mortgage Loan: This loan made up about 9.99% of the trust's first total loan value.
• Great Lakes Crossing Outlets Mortgage Loan: This loan was about 7.6% of the first investments.
• Scottsdale Fashion Square Mortgage Loan: This loan made up about 7.5% of the first investments.
• 1201 Third Avenue Mortgage Loan: This loan was about 9.1% of the first investments.
• CX - 250 Water Street Mortgage Loan: This loan made up about 8.1% of the first investments.
• National Warehouse & Distribution Portfolio Mortgage Loan: This loan was about 5.3% of the first investments.
• Green Acres Mortgage Loan: This loan made up about 7.6% of the first investments.
• 100 Jefferson Road Mortgage Loan: This loan was about 4.6% of the first investments.
• One Campus Martius Mortgage Loan: This loan was about 4.2% of the first investments.
• Riverport Tower Mortgage Loan: This loan was about 2.3% of the first investments.
• Sentinel Square II Mortgage Loan: This loan made up about 1.5% of the first investments.
• Centers of High Point Mortgage Loan: This loan was also about 1.5% of the first investments.

How well your investment does depends on several things. It relies on the financial health of these business properties. It also depends on how well their tenants operate. Finally, it needs borrowers to pay their mortgages.

Who's Managing These Loans? (The Servicers)

Many specialized groups manage this large pool of commercial property loans. Each has different jobs:

• Midland Loan Services is the main "master servicer" for many trust loans. They also act as the "primary servicer" for specific loans. These include Green Acres, Sentinel Square II, Centers of High Point, and One Campus Martius. Their key job is to manage loans daily. They collect payments, handle escrow, and answer borrower questions.
  • Compliance for 2025: For the year ending December 31, 2025, Midland Loan Services officially confirmed they met all their duties. They followed the servicing agreement in every important way. This "clean bill of health" assures investors. It shows the service provider followed rules. This is key for the trust's steady cash flow.
• LNR Partners, LLC and Argentic Services Company LP are "special servicers." They manage loans facing money troubles. This includes late payments, defaults, or upcoming payment problems. LNR handles the main trust loans, especially 1201 Third Avenue. Argentic manages Pacific Design Center, CX - 250 Water Street, and 100 Jefferson Road loans. Their goal is to reduce losses for the trust. They do this through loan changes, foreclosures, or selling properties. They aim to get the most back from troubled assets.
• Computershare Trust Company, National Association does many jobs. They are mainly the "custodian" for most loans. They protect all original loan papers and collateral. They also act as "trustee" for many loans. They oversee the trust's management. They ensure it follows the pooling and servicing agreement (PSA).
• Park Bridge Lender Services LLC and Pentalpha Surveillance LLC are "operating advisors." They give independent advice to the master and special servicers. This ensures all decisions benefit certificate holders.

A Notable Servicer Transition in 2025: Some loans saw a change in primary servicer this year. These were 1201 Third Avenue, CX - 250 Water Street, National Warehouse & Distribution Portfolio, and 100 Jefferson Road. Wells Fargo Bank was the primary servicer from January 1 to February 28, 2025. Then, Trimont LLC became the primary servicer for these loans on March 1, 2025. Such changes happen for various business reasons. But loan management continues smoothly.

How Much Money Did They Make?

Benchmark 2023-B38 is a CMBS Trust. It doesn't make "profit" or "revenue" like a normal company. Its financial health comes from steady cash flow from its mortgage loans. It then pays this money to its certificate holders.

For the year ending December 31, 2025, investors usually look at these key numbers to check the trust's performance:

• Total Interest Income: This is the total interest collected from borrowers on the 12 mortgage loans. It is the trust's main source of cash.
• Principal Payments: This is the principal money borrowers paid, both planned and early.
• Servicing Fees and Trust Expenses: These are the costs to manage the loans. They include fees for servicers, trustees, and other admin.
• Net Cash Flow Available for Distribution: This is the money left after expenses. The trust then pays it to certificate holders.
• Distributions to Certificate Holders: These are the exact principal and interest payments. They go to each certificate class (like A, B, C). Payments reflect their interest rates and payment order.
• Loan Delinquency and Default Rates: This is the percentage of loans with late payments. It also includes loans in special servicing due to default.
• Realized Losses: These are losses from foreclosures or selling defaulted loans. They hit junior certificate classes first.
• Weighted Average Coupon (WAC) and Debt Service Coverage Ratio (DSCR): These numbers show the loan pool's overall return. They also show the financial health of the properties.

What Could Go Wrong for Investors? (Risk Factors)

Investing in CMBS like Benchmark 2023-B38 Mortgage Trust has risks you should know about:

• Credit Risk / Default Risk: This is the main risk. Borrowers might not pay their commercial mortgage loans. This happens due to bad property performance, tenant problems, or economic slowdowns. Defaults mean losses for the trust. This hurts certificate holders, especially those with junior certificates.
• Property-Specific Risks: Each loan is backed by a specific commercial property. Risks include empty spaces, lower rent, outdated buildings, environmental issues, or natural disaster damage.
• Market Value Risk: Commercial property values can drop. This happens due to bad market conditions, too much supply, or a recession. This lowers how much money the trust gets back if it forecloses.
• Interest Rate Risk: Changing interest rates can affect CMBS certificate values. If rates go up, fixed-rate certificates usually lose value. Higher rates also make refinancing more costly for borrowers. This could lead to more defaults.
• Prepayment Risk: Borrowers might pay off their loans early. This happens if they sell property or refinance at lower rates. This returns principal to investors. But it can cut total interest earned. You might have to reinvest money at lower returns.
• Extension Risk: Borrowers might not refinance their loans when due. This can cause extensions or defaults. This delays principal payments to certificate holders past the expected date.
• Liquidity Risk: Some CMBS certificates are harder to sell quickly. This is true for smaller or less traded groups. You might struggle to sell them fast for a good price.
• Servicer Performance Risk: Servicers must do their jobs by contract. But how well they collect payments matters. Managing bad loans and getting money back directly affects the trust's performance.
• Subordination Risk: CMBS trusts issue different classes of certificates. These have different payment priorities. Junior certificate holders take the first losses from loan defaults. This means they face more principal losses than senior certificate holders.
• Concentration Risk: The trust holds many loans. But if too many are in one property type (like offices), region, or with one big borrower, problems in that area could hit hard.