UBS Commercial Mortgage Trust 2018-C11 Annual Report

Hey there! Think of this as our friendly chat about UBS Commercial Mortgage Trust 2018-C11. We'll discuss their past year's performance. We'll see what worked, what didn't, and if it's a good investment. No fancy finance talk, just plain English so you can get the real picture.

First, UBS Commercial Mortgage Trust 2018-C11 isn't a typical company. It's a Commercial Mortgage-Backed Security (CMBS) Trust. Imagine it as a special fund. It holds many commercial mortgage loans, or parts of them. It then sends these loan payments to investors. So, 'performance' means how well those loans are doing. Are borrowers paying on time? Or are there problems?

This annual report covers the fiscal year that ended on December 31, 2025.

Let's explore these key areas. This is our roadmap:

1. What does this Trust do and how did they perform this year?

   • What they do: This Trust holds many commercial mortgage loans. It started in 2018 with about $1.2 billion in loans. There were 78 individual commercial mortgage loans then. By December 31, 2025, the loan balance reduced to about $985 million. This covers 62 remaining loans. These aren't home loans. They are for properties like shopping centers (e.g., Throggs Neck Shopping Center, Stony Creek Marketplace), hotels (e.g., Orlando Airport Marriott Lakeside, Melbourne Hotel Portfolio, Soho House Chicago), office buildings (e.g., 20 Times Square, Premier Rochester Office Portfolio, Riverfront Plaza), and medical offices (e.g., HTI Medical Office Portfolio). The Trust holds a variety of property types. Office properties make up 32% of the current balance. Retail is 25%, hospitality 18%. Other property types form the remaining 25%.
   • How it works: The Trust often owns only part of a larger loan. Sometimes it shares loans with other lenders. These are called "pari passu loans". Its main job is collecting loan payments. It then sends these payments to investors who own parts of the Trust. Payments follow a "waterfall" structure. The safest investors get paid first. Then come the next safest, and so on. The riskiest investors get paid last. This system sets the payment order for both principal and interest.
   • Performance this year: For the year ending December 31, 2025, the Trust's loans earned an average interest rate of 4.15%. About 93.5% of the loans were current on payments. However, 4.2% of loans, or $41.4 million, were 30-59 days late. Another 2.3%, or $22.6 million, were 60+ days late or in foreclosure. Borrowers paid down $15.8 million in principal. The Trust also lost $3.5 million from two problem loans that were resolved.

2. Financial performance - cash flow and metrics This Trust holds loans, so it doesn't have typical "revenue" or "profit". Its financial health depends on the mortgage loans. Are borrowers paying? Are the properties still valuable? This year, the Trust earned about $40.9 million in interest from its loans. After paying about $2.1 million for servicing, trustee, and other costs, $38.8 million was left. This cash went to certificate holders. Investors receive this cash flow following the payment waterfall system. The average late payment rate was 6.5% this year. This is up from 4.8% last year. It shows loan performance is weakening.

3. Major wins and challenges this year

   • Wins: The Trust saw 7 loans pay off successfully. These totaled $78.2 million, on or before their due dates. This shows good performance for part of the portfolio. For example, the Stony Creek Marketplace loan, worth $18.5 million, was refinanced. It paid off in Q3 2025, avoiding a possible default. Also, the Orlando Airport Marriott Lakeside loan performed well. This important asset saw its Net Operating Income (NOI) grow 12%. This helped keep the overall loan pool stable.
   • Challenges: A big challenge was more loans going to "special servicing". Five loans, worth $65.3 million, moved there this year. This was mainly due to missed payments or weaker office property performance. The 20 Times Square Mortgage Loan, worth $105 million, is a major worry. It still has occupancy problems. Its current occupancy is 68%, down from 85% when issued. Its debt service coverage ratio (DSCR) also fell to 0.95x. This loan is now over 60 days late. It has moved to special servicing.
   • Who manages some loans also changed. For instance, Trimont LLC will manage several key loans. This includes Griffin Portfolio II and 20 Times Square. They start on March 1, 2025. This change impacts about 18% of the total loan balance. It aims to bring in experts. These experts will manage assets, especially those with problems. So, different companies will collect payments. They will also handle any loan issues.

4. Financial health - cash, debt, liquidity The Trust's financial health depends on its commercial mortgage loans. If borrowers keep paying, the Trust stays healthy. The Trust doesn't hold much cash itself. It simply passes money through. But it does have reserve accounts. These include an interest rate cap reserve for variable-rate loans. It also has a servicer advance system. This year, the master servicer advanced about $1.2 million. This covered missed principal and interest payments on late loans. It ensured senior bondholders got paid on time. The Trust's "debt" is its CMBS certificates. These totaled $985 million outstanding at year-end. Only cash from the mortgage loans repays these certificates.

5. Key risks for investors First, this Trust doesn't have a "stock price". It's not like buying shares in a company. Investors hold certificates, like bonds. These give them a claim on mortgage loan payments. The main risk is if borrowers struggle to pay their commercial mortgages. This happens if the economy slows, properties lose value, or interest rates shift a lot. If loans default, investors could lose money. This especially affects those with riskier certificates.

   • Specific risks include:
     • Credit Risk: The main risk is borrowers not paying. 6.5% of loans are currently late. $65.3 million are in special servicing. So, future losses are possible.
     • Maturity Risk: About $150 million in loans will mature soon. This is 15.2% of the current balance, due in 1-2 years. Refinancing these loans could be tough. Especially with higher interest rates or weaker property values.
     • Interest Rate Risk: Most loans have fixed rates. But rising rates can hurt property values. They also make it harder for borrowers to refinance. This is true for loans with low debt service coverage ratios.
     • Concentration Risk: The Trust has many office loans (32% of the pool). The office sector faces challenges. Remote work and empty spaces hurt it, as seen with 20 Times Square.
     • Property-Specific Risk: Some large loans are very important. The 20 Times Square Mortgage Loan is one example, at 10.7% of the pool. Its performance affects the Trust a lot. If such a large loan performs poorly or defaults, it could really hurt cash flow and investor returns.

6. Competitive positioning This Trust holds specific commercial mortgage loans and doesn't "compete" like a regular business. It's a collection of assets. Investors compare its certificates to other CMBS trusts from the same time, checking its stability and losses against market averages.

7. Leadership or strategy changes Who "services" (manages) some loans is changing. Trimont LLC will now manage several loans. They take over from Wells Fargo Bank on March 1, 2025. This affects loans worth about $177 million. That's 18% of the total loan pool. Midland Loan Services and Argentic Services Company LP are also key managers. These changes aim to improve loan performance and problem-solving. This is especially true for loans needing closer attention.

8. Future outlook The Trust's future depends on the commercial real estate market. It also depends on the economy. The Trust still faces office sector challenges. This sector is 32% of its portfolio. Remote work hurts occupancy and property values. Hospitality (18% of loans) shows recovery signs. But it's still sensitive to travel and economic slumps. About $150 million in loans mature in the next two years. How well they refinance will be key to future performance. The economic forecast will matter a lot. Interest rates and GDP growth affect property cash flows. They also affect borrowers' ability to refinance.

9. Market trends or regulatory changes affecting them Market trends greatly affect the Trust's performance. High interest rates have raised borrowing costs. This makes refinancing harder for maturing loans. It also might hurt property values. Changes in the office market are also a factor. Hybrid work models push down occupancy and income for office properties in the Trust. Retail properties have shown some strength. But e-commerce growth is a long-term trend. It still impacts physical retail assets. Future rules could impact the Trust. New ESG standards for buildings or changes in lending standards might affect property values and borrowers' access to money, influencing the Trust's assets. The U.S. economy's health is also key. GDP growth is projected at 1.8% for 2026. Unemployment is around 4.0%. These will drive commercial real estate performance.

Understanding these details about the Trust's loans, challenges, and market environment is key to evaluating the potential risks and returns of its certificates.