DBRS Confirms All Classes of COMM 2016-CCRE28 Mortgage Trust

DBRS Limited (DBRS) confirmed the ratings for all classes of Commercial Mortgage Pass-Through Certificates, Series 2016-CCRE28 (issued by COMM 2016-CCRE28 Mortgage Trust as follows:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance. The collateral consists of 49 loans secured by 119 commercial and multifamily properties. As of the November 2018 remittance, the pool had an aggregate trust balance of approximately $1.02 billion, representing a collateral reduction of 1.0% since issuance due to scheduled loan amortization. To date, 46 loans, representing 95.2% of the current pool balance, have reported year-end (YE) 2017 financials. Based on the most recent YE financials, the pool reported a weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.71 times (x) and 9.7%, respectively, compared with the DBRS Term DSCR and DBRS Debt Yield figures of 1.51x and 8.4% at issuance, respectively. The top 15 loans, representing 66.8% of the current pool balance, reported a WA DSCR of 1.74x compared with the WA DBRS Term DSCR of 1.55x, representing a WA net cash flow (NCF) growth of 12.4% over the DBRS NCF figures derived at issuance.

As of the November 2018 remittance, there is one loan in special servicing (1.2% of the pool) and three loans (5.7% of the pool) on the servicer’s watchlist. All three loans on the servicer watchlist were flagged because of non-performance-related reasons. Based on YE2017 financials, these loans reported a WA DSCR of 1.51x compared with the WA DBRS Term DSCR figure of 1.35x, representing a WA NCF growth of 12.5% since issuance.

The Holiday Inn Fort Worth North Fossil Creek loan (Prospectus ID#24) was transferred to special servicing in February 2018 due to imminent monetary default, as the borrower cited an inability to fund cash flow shortfalls and complete a required property improvement plan (PIP) that was due in June 2018 as part of the franchise agreement with the InterContinental Hotels Group plc (IHG). As the PIP was not completed by the due date, and in light of other issues with the franchise agreement, IHG issued a termination notice for the agreement but has since provided an extension of the cure date and has agreed to a repayment plan with the borrower for past due franchise fees. The servicer confirms that a forbearance is in negotiations to allow the borrower time to complete the PIP and bring the franchise agreement back into good standing. It is noteworthy that a PIP reserve was established at issuance for guest room renovations that included case and soft goods replacements, with a total of $837,694 ($6,648 per key) collected. According to the information obtained by the Special Servicer, the full scope of the required PIP appears to be much higher than contemplated at issuance, with the borrower estimating that $1.2 million in work remained outstanding as of October 2018. The source of the discrepancy is unclear and the Special Servicer is working with the borrower to confirm the details of the required project.

Classes X-A, X-HR, XP-A, X-B, X-C, X-D and X-E 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#3 – Promenade Gateway (5.9% of the pool)
-- Prospectus ID#24 – Holiday Inn Fort Worth North Fossil Creek (1.2% of the pool)

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 North American CMBS Surveillance Methodology, which can be found on dbrs.com under Methodologies & Criteria. 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.

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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

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