DBRS Finalizes Provisional Ratings on COMM 2016-CCRE28 Mortgage Trust

DBRS, Inc. (DBRS) has today finalized its provisional ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2016-CCRE28 (the Certificates) to be issued by COMM 2016-CCRE28 Mortgage Trust. The trends are Stable.

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-HR at AAA (sf)
-- Class XP-A at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-HR at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-B at AAA (sf)
-- Class X-C at AAA (sf)
-- Class X-D at AAA (sf)
-- Class X-E at AAA (sf)
-- Class X-F at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (high) (sf)
-- Class G at BB (low) (sf)
-- Class H at B (low) (sf)

Classes X-B, X-C, X-D, X-E, X-F, E, F, G and H have been privately placed.

The Class XP-A, Class X-A, Class X-HR, Class X-B, Class X-C, Class X-D, Class X-E and Class X-F balances are notional. DBRS ratings on interest-only (IO) certificates address the likelihood of receiving interest based on the notional amount outstanding. DBRS considers the IO certificates’ position within the transaction payment waterfall when determining the appropriate rating.

The collateral consists of 49 fixed-rate loans secured by 119 commercial properties. The conduit pool was analyzed to determine the ratings, reflecting the long-term probability of loan default within the term and its liquidity at maturity. When the cut-off loan balances were measured against the DBRS Stabilized net cash flow (NCF) and their respective actual constants, only two loans, representing 5.6% of the total pool, had a DBRS Term debt service coverage ratio (DSCR) below 1.15 times (x), a threshold indicative of a higher likelihood of mid-term default. Additionally, to assess refinance risk given the current low interest rate environment, DBRS applied its refinance constants to the balloon amounts, resulting in 66.3% of the pool having DBRS Refinance (Refi) DSCRs below 1.00x; however, the DBRS Refi DSCR for the loans are based on a weighted-average (WA) stressed refinance constant of 9.86%, which implies an interest rate of 9.2%, amortizing on a 30-year schedule. This represents a significant stress of 4.6% over the WA contractual interest rate of the loans in the pool. Additionally, 89.1% of these loans with DBRS Refi DSCRs below 1.00x are located in urban or suburban markets.

Ten loans, representing 42.3% of the pool, are located in urban markets, which benefit from consistent investor demand even in times of stress. Furthermore, only 13 loans, representing 13.5% of the transaction balance, are located in tertiary or rural markets. Additionally, two loans, representing 8.1% of the pool balance, were modeled with Excellent property quality and one loan, representing 5.8% of the pool, received Above Average property quality by DBRS. There are no loans in the transaction secured by student housing properties, which often have higher cash flow volatility.

Thirteen loans, representing 32.3% of the pool (including four loans in the top ten), are secured by single-tenant assets. Furthermore, 34 loans, comprising 84.4% of the pool balance, are structured with either full or partial IO periods. The DBRS Term DSCR is calculated by using the amortizing debt service obligation and the DBRS Refi DSCR is calculated by considering the balloon balance and lack of amortization when determining refinance risk. DBRS determines probability of default (POD) based on the lower of Term or Refi DSCR, so loans that lack amortization will be treated more punitively.

The DBRS sample included 24 of the 49 loans in the pool, representing 77.3% of the pool by loan balance. Site inspections were performed on 46 of the 119 properties in the portfolio, representing 68.8% of the pool. The DBRS sample had an average NCF variance of -9.5% and ranged from -22.6% to +3.7%. DBRS identified seven loans, representing 10.8% of the pool (including two in the top 15), that have sponsorship and/or loan collateral associated with a prior discounted payoff, loan default, Delaware Statutory Trust borrower, limited net worth and/or liquidity relative to loan obligation, a historical negative credit event and/or a recent litigation issue (pending and/or prior) associated with their respective loan collateral. DBRS increased the POD for loans with identified sponsorship concerns.

The ratings assigned to the Certificates by DBRS are based exclusively on the credit provided by the transaction structure and underlying trust assets. All classes will be subject to ongoing surveillance, which could result in upgrades or downgrades by DBRS after the date of issuance.

Notes:
The Class XS-A certificates at the time provisional ratings were assigned are now referred to as Class X-A certificates.

All figures are in U.S. dollars unless otherwise noted.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodology is North American CMBS Rating Methodology, which can be found on our website under Methodologies.

With regard to due diligence services, DBRS was provided with the Form ABS Due Diligence-15E (Form-15E) which contains the description of the information that the third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While DBRS did not rely on the due diligence services outlined in Form-15E, DBRS did use the Data File outlined in the Independent Accountant’s Report in its analysis to determine the ratings.