DBRS Confirms All Classes of LSTAR Commercial Mortgage Trust 2016-4

DBRS Limited (DBRS) has today confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2016-4 issued by LSTAR Commercial Mortgage Trust 2016-4:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance in June 2016. The transaction consists of 22 fixed-rate loans secured by 26 commercial properties. The pool has experienced a collateral reduction of 0.3% since issuance as a result of scheduled amortization, with all of the original 22 loans outstanding. Approximately 94.0% of the pool reported YE2016 financials, reporting a weighted-average (WA) debt service coverage ratio (DSCR) of 1.34 times (x) and a WA debt yield of 8.1%. Comparatively, the issuance WA DSCR and WA debt yield were 1.38x and 7.4%, respectively.

As of the June 2017 remittance, there were two loans, representing 11.4% of the pool balance, on the servicer’s watchlist and no loans in special servicing. The largest loan on the servicer’s watchlist is Prospectus ID#1, Charlotte Plaza, representing 9.9% of the current pool balance. The loan is secured by a 632,171-square-foot office building located in Charlotte, North Carolina, and was placed on the servicer’s watchlist because of uncertainties surrounding the ability of the largest tenant, Charlotte School of Law (39.5% of the net rentable area), to continue its operations. As of YE2016, the loan reported a DSCR of 2.03x compared with the DBRS issuance DSCR of 1.61x. To account for the elevated risk, DBRS applied a stressed cash flow to the loan.

DBRS will soon provide updated loan-level commentary and analysis for larger and/or pivotal watchlisted loans, as well as for the largest ten loans in the pool, in the DBRS commercial mortgage-backed securities (CMBS) IReports platform. Registration is free. To view these and future loan-level updates provided as part of DBRS’s ongoing surveillance for this transaction, please register or log into DBRS CMBS IReports at www.ireports.dbrs.com.

Notes:
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 methodology is CMBS North American Surveillance (March 2017), which can be found on www.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.