DBRS Confirms Ratings on Morgan Stanley Bank of America Merrill Lynch Trust 2016-C29

DBRS Limited (DBRS) has today confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2016-C29 (the Certificates) issued by Morgan Stanley Bank of America Merrill Lynch Trust 2016-C29:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (high) (sf)
-- Class X-D at BBB (high) (sf)
-- Class D at BBB (sf)
-- Class X-E at BBB (low) (sf)
-- Class E at BB (high) (sf)
-- Class X-F at BB (sf)
-- Class F at BB (low) (sf)
-- Class X-G at B (sf)
-- Class G 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 April 2017 remittance, all 69 loans remain in the pool with an aggregate outstanding principal balance of approximately $805.3 million, which represents a collateral reduction of 0.5% since issuance as a result of scheduled loan amortization. Eight loans (representing 23.8% of the pool), including the largest three loans, are structured with full interest-only (IO) terms while an additional 25 loans (representing 33.0% of the pool) have partial IO periods remaining, ranging from six to 48 months. According to the DBRS issuance figures, the transaction had a weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield of 1.64 times (x) and 9.0%, respectively, or 1.51x and 9.0%, respectively, excluding shadow-rated loans. To date, 47 loans (representing 67.7% of the pool) have reported YE2016 net cash flow figures. The largest 15 loans in the pool collectively represent 51.4% of the transaction balance and nine of those loans are reporting partial-year 2016 financials, showing a WA annualized DSCR and debt yield of 1.93x and 11.0%, respectively, compared with the DBRS Issuance WA DSCR and WA debt yield figures of 1.70x and 11.0%, respectively.

As of the April 2017 remittance, there are no loans in special servicing and four loans (representing 2.3% of the pool) are on the servicer’s watchlist. The largest loan on the watchlist, Midway Industrial Park (Prospectus ID#46; 0.8% of the pool) is secured by a 84,748 square foot industrial building in San Diego, California. The loan was placed on the watchlist after the loss of the second-largest tenant, The Church of Scientology, which represented 17.9% of the net rentable area before leaving at lease expiration in December 2016. The loan is reporting a Q3 2016 DSCR of 2.82x. The second-largest loan on the watchlist, Winslow Plaza (Prospectus ID#58; 0.6% of the pool) was flagged for upcoming rollover; however, the tenants in question have all extended their leases for five-year terms through 2022. The remaining two watchlisted loans were flagged for low DSCRs caused by increased expenses.

At issuance, DBRS assigned an investment-grade shadow rating to one loan, Penn Square Mall (Prospectus ID#3; 5.8% of the pool) and has today confirmed that the characteristics of this loan continue to support the shadow rating.

The rating assigned to Class F materially deviates from the higher rating implied by the quantitative results. The deviation is warranted because sustainability of loan trends has not yet been 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 register or log into 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 principal methodologies are North American CMBS Rating Methodology (January 2017) and CMBS North American Surveillance (December 2016), which can be found on dbrs.com under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.