DBRS Confirms Ratings on Morgan Stanley Bank of America Merrill Lynch Trust 2016-C28

DBRS Limited (DBRS) has today confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2016-C28 (the Certificates) issued by Morgan Stanley Bank of America Merrill Lynch Trust 2016-C28.

-- 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-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class X-D at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class E-1 at BBB (sf)
-- Class E-2 at BBB (low) (sf)
-- Class F at BB (sf)
-- Class F-1 at BB (sf)
-- Class F-2 at BB (sf)
-- Class EF at BB (sf)
-- Class G at B (low) (sf)
-- Class G-1 at B (high) (sf)
-- Class G-2 at B (low) (sf)
-- Class EFG at B (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall performance of the transaction, which has remained in line with DBRS’s expectations since issuance. As of the February 2017 remittance, all 42 loans remain in the pool with an aggregate outstanding principal balance of approximately $952.7 million, which represents a collateral reduction of 0.3% since issuance as a result of scheduled loan amortization. Pool-wide, six loans (27.1% of the pool) are structured with full interest-only (IO) terms, while an additional 20 loans (49.2% of the pool) have partial IO periods remaining, ranging from seven months to 46 months. According to the DBRS underwritten (UW) figures, the transaction had a weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield of 1.77 times (x) and 9.4%, respectively, or 1.41x and 8.4%, respectively, excluding shadow-rated loans. To date, five loans (12.6% of the pool) have reported year-end 2016 net cash flow (NCF) figures. The largest 15 loans in the pool collectively represent 72.3% of the transaction balance and 13 of those loans are reporting partial-year 2016 financials, showing a WA annualized DSCR and debt yield of 1.74x and 14.3%, respectively.

As of the February 2017 remittance, there are no loans in special servicing and three loans (7.2% of the pool) on the servicer’s watchlist. The largest loan on the watchlist, Navy League Building (Prospectus ID#4, 6.3% of the pool) is secured by a 190,926 sq. ft. office building in Arlington, Virginia. The loan was placed on the watchlist as a result of low income due to rent abatements in place during the reporting period for three tenants, including the largest tenant, which represents 25.7% of the NRA on a lease expiring in April 2027. At closing, the borrower deposited $3.3 million in escrow to fund the rent abatements, with funds to be released monthly through December 2017. The Q3 2016 DSCR was reported at 1.05x and property occupancy remains strong at 98.2%, as of the September 2016 rent roll. The remaining two loans on the watchlist were flagged for non-performance-related reasons pertaining to outstanding servicing advances and deferred maintenance.

At issuance, DBRS assigned an investment-grade shadow rating to two loans, Penn Square Mall (Prospectus ID#1, 9.5% of the pool) and GLP Industrial Portfolio A (Prospectus ID#3, 7.4% of the pool). DBRS has today confirmed that the performance of these loans remain consistent with the investment-grade loan characteristics.

The ratings assigned to Classes G-1, G-2, G, and EFG materially deviate from the higher ratings implied by the quantitative results. The deviations are warranted due to sustainability of loan performance trends not yet demonstrated.

DBRS has provided updated loan-level commentary and analysis for larger and/or pivotal watchlisted loans, as well as for the largest 15 loans in the pool, in the DBRS CMBS IReports platform. To view these and future loan-level updates provided as part of DBRS’s ongoing surveillance for this transaction, please log into DBRS CMBS IReports at www.ireports.dbrs.com.

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

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

The applicable methodologies are North American CMBS Rating Methodology (January 2017) and CMBS North American Surveillance (December 2016), which can be found on our website under Methodologies.