DBRS Morningstar Changes Trend on One Class of CFCRE 2016-C6 to Negative from Stable, Removes Four Classes from Under Review with Negative Implications, and Confirms All Classes

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2016-C6 issued by CFCRE Commercial Mortgage Trust 2016-C6 as follows:

--Class A-1 at AAA (sf)
--Class A-SB at AAA (sf)
--Class A-2 at AAA (sf)
--Class A-3 at AAA (sf)
--Class A-M at AAA (sf)
--Class B at AA (sf)
--Class C at A (sf)
--Class D at BBB (low) (sf)
--Class E at BB (sf)
--Class F at B (low) (sf)
--Class X-A at AAA (sf)
--Class X-B at AA (high) (sf)
--Class X-E at BB (high) (sf)
--Class X-F at B (sf)

With this rating action, DBRS Morningstar removed Classes E, F, X-E, and X-F from Under Review with Negative Implications, where they were placed on August 6, 2020, due to DBRS Morningstar’s concerns about the transaction’s significant concentration of loans secured by retail and hotel collateral that collectively represent greater than 50.0% of the pool’s current trust balance. The trends on these classes are Negative. DBRS Morningstar notes that these two asset classes remain exposed to the multiple headwinds brought on by the Coronavirus Disease (COVID-19) pandemic and believes the near-term risk for multiple loans in the transaction is heightened. The trends on all other Classes are Stable.

According to the November 2020 remittance, four loans, representing 9.7% of the current trust balance, are in special servicing, including two loans secured by hotel assets: Inn at the Colonnade (Prospectus ID#10; 2.9% of the current trust balance) and Holiday Inn Express Nashville Downtown (Prospectus ID#11; 2.8% of the current trust balance). Inn at the Colonnade, secured by a 125-key full service hotel in Baltimore, was transferred to the special servicer in March 2020, given the ongoing effects of the pandemic. DBRS Morningstar notes its concern that a loan modification has not been agreed upon and that the subject recently received an updated appraisal reporting a September 2020 value of $25.0 million (-26.0% variance from issuance value of $33.8 million), which implies a current loan-to-value ratio of 87.0%. DBRS Morningstar believes that, while the subject is not immune to the short-term stressors from the pandemic, the property’s long-term outlook is clearer, given the corporate and leisure demand generated by its proximity to Johns Hopkins University, which has an enrollment of over 20,000 students and is a renowned research center. Given that short-term room demand remains suppressed, DBRS Morningstar analyzed the loan with an elevated probability of default (PoD). The Holiday Inn Express Nashville Downtown, secured by a 287-key hotel in downtown Nashville, was transferred to the special servicer in June 2020. The property’s proximity to multiple downtown attractions, such as the entertainment district, Bridgestone Arena (home of the NHL’s Nashville Predators), and Nissan Stadium (home of the NFL’s Tennessee Titans), puts the subject in a vulnerable position in the short term, given its reliance on entertainment-based traffic to the area, which has had several restrictions because of the pandemic. The subject does benefit from moderate leverage and a well-capitalized sponsor in Highland Capital Management, which purchased the property in January 2019 for a publicly reported value of $117.5 million. DBRS Morningstar analyzed the loan with an elevated PoD in its analysis for this review.

Additionally, fourteen loans, representing 29.5% of the current trust balance, are on the servicer’s watchlist per the November 2020 remittance. DBRS Morningstar notes its concerns about the Residence Inn by Marriott Los Angeles LAX/Century Boulevard (Prospectus ID#7; 3.1% of the current trust balance), which is secured by a 231-key full service extended stay Residence Inn located within one mile of Los Angeles International Airport. The special servicer provided payment relief to the sponsor in the form of utilizing reserve funds to cover debt service payments and deferring furniture, fixtures, and equipment reserve deposits for the period between June and November 2020. DBRS Morningstar believes the short-term risk is heightened for this loan, given its reliance on the volume of airline travel and its declining cash flow performance prior to the pandemic when it reported a YE2019 DSCR of 1.61 times (x), down from 2.15x at YE2017. DBRS Morningstar notes that, while the property reported a relatively high occupancy of 87.6% as of Q2 2020, an elevated PoD was applied, given the property’s main demand driver is likely to have a longer return to normalcy. Additionally, DBRS Morningstar generally applied increased PoD factors where applicable to other loans on the servicer’s watchlist.

At issuance, the transaction consisted of 45 loans at an original trust balance of $787.5 million. Per the November 2020 remittance, 44 loans remain in the transaction at a current trust balance of $757.0 million, representing a collateral reduction of 3.9% since issuance. The transaction is concentrated by property type as 15 loans, representing 38.0% of the current trust balance, are secured by retail assets while eight loans, representing 14.7% of the current trust balance, are secured by hotel assets. Office collateral makes up the second-largest concentration, represented by nine loans and 26.9% of the current trust balance. One loan, representing 1.7% of the current trust balance, is fully defeased.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Classes X-A, X-B, X-E, and X-F 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 are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans:

--Residence Inn by Marriott LAX (Prospectus ID#7; 3.1% of the current trust balance)
--Inn at the Colonnade (Prospectus ID#10; 2.9% of the current trust balance)
--Holiday Inn Express Nashville - Downtown (Prospectus ID#11; 2.8% of the current trust balance)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is the North American CMBS Surveillance Methodology (March 6, 2020), which can be found on dbrsmorningstar.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 Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. 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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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@dbrsmorningstar.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

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

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