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

DBRS Limited (DBRS) 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. At issuance, the transaction consisted of 22 fixed-rate loans secured by 26 commercial properties. All loans remain in the pool, which has experienced a collateral reduction of 0.6%, representing a current trust balance of $503.0 million. Approximately 91% of the pool is reporting YE2017 financials, reporting a weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.34 times (x) and 7.4%, respectively. Per YE2016 financials, the pool reported a WA DSCR and debt yield of 1.34x and 8.1%, respectively. Per YE2017 financials, the top 15 loans are reporting a WA DSCR and debt yield of 1.33x and 7.2%, respectively, representing a WA net cash flow (NCF) growth of 9.1% over DBRS NCF figures estimated at issuance.

Per the May 2018 remittance, there are five loans, representing 22.9% of the current pool balance, that are on the servicer’s watchlist, including the largest loan in the transaction, Charlotte Plaza (Prospectus ID#1, 9.9% of the current pool). The loan is secured by an office building in the Uptown business district of Charlotte, North Carolina, and is on the servicer’s watchlist as its largest tenant, Charlotte Law School (39.5% of NRA), vacated the subject. DBRS analysed the loan under a stressed cash flow scenario given the largest tenant’s vacancy. Two loans, representing 3.7% of the current pool, are on the servicer’s watchlist for upcoming maturity.

Classes X-A and X-B are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

All ratings will be subject to ongoing surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

As part of this review, DBRS has provided updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID #1 – Charlotte Plaza
-- Prospectus ID #6 – Hotel Monterey
-- Prospectus ID #7 – Bluegrass Manor
-- Prospectus ID #22 – 310 Superior Street

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for the entire CMBS universe, as well as deal and loan-level commentary for all DBRS rated transactions.

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

The principal methodology is CMBS North American Surveillance, which can be found on dbrs.com under Methodologies. For a list of the Structured Finance related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document on www.dbrs.com. Please note that not every related methodology listed under a principal Structured Finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

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 under Related Documents or by contacting us at info@dbrs.com.

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

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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