DBRS Upgrades Five Classes of A10 Term Asset Financing 2016-1, LLC

DBRS Limited (DBRS) upgraded the ratings of the following Commercial Mortgage Pass-Through Certificates, Series 2016-1 issued by A10 Term Asset Financing 2016-1, LLC:

-- Class B to AA (low) (sf) from A (low) (sf)
-- Class C to A (low) (sf) from BBB (sf)
-- Class D to BBB (sf) from BBB (low) (sf)
-- Class E to BB (high) (sf) from BB (sf)
-- Class F to B (high) (sf) from B (sf)

DBRS also confirmed the rating on Class A-2 at AAA (sf). All trends remain Stable.

The rating upgrades reflect the increased credit support to the bonds as a result of successful loan repayment since issuance. As of the November 2018 remittance, ten of the original 28 fixed- and floating-rate loans remain in the trust with an aggregate principal balance of $77.5 million. To date, 18 loans have repaid from the trust, while other payments have been received from scheduled loan amortization and/or loan re-sizing requirements, together representing a collateral reduction of 71.2% since issuance.

Most loans were originally structured with two- to four-year terms and include built-in extensions. Nine of the outstanding loans (87.1% of the current cut-off trust balance) were structured with future funding dollars to be used for property renovations and future leasing costs to aid in property stabilization. Six of the outstanding loans (50.1% of the current cut-off trust balance) were structured with subordinate B-note debt held outside of the trust. Four loans (32.3% of the current cut-off trust) are cross-collateralized and cross-defaulted within two separate portfolios. These loans are secured by properties located within the Atlanta metropolitan statistical area and share the same loan sponsor, Stream Realty Partners, LP. Although these loans are concentrated both geographically and by loan sponsor, the portfolio was recently re-appraised in October 2018, yielding higher as-is and stabilized values totaling $57.9 million (42.0% increase from the issuance value) and $89.8 million (24.4% increase from the issuance value), respectively. These four loans also had combined outstanding future funding facilities of approximately $7.8 million as of September 2018.

Most of the remaining loans benefit from low leverage on a per-unit basis, with a weighted-average debt yield of 10.3% based on the most recently reported net operating income against the outstanding trust balance, which is considered healthy given that the pool consists of stabilizing assets. Some borrowers appear to have successfully implemented their respective business plans; however, the majority of the properties continue to be in the process of stabilization, in various stages of progress as compared with the respective plans for each loan outlined at issuance. Details on the stabilization status for pivotal loans within the pool are provided in the Loan Commentary on the DBRS Viewpoint platform, as noted below.

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#6 - St. Louis Holiday Inn (12.9% of the current cut-off trust balance)
-- Prospectus ID#7 - Stream – Town & Country (12.2% of current cut-off trust balance)
-- Prospectus ID#18 - Stream – Moreland (8.0% of the current cut-off trust balance)

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, 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.