Press Release

DBRS Morningstar Confirms All Classes of CSAIL 2016-C7 Commercial Mortgage Trust; Assigns Negative Trends to Six Classes

CMBS
January 21, 2021

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2016-C7 issued by CSAIL 2016-C7 Commercial Mortgage Trust as follows:

-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class B at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class C at AA (low) (sf)
-- Class D at BBB (high) (sf)
-- Class X-E at BB (high) (sf)
-- Class E at BB (sf)
-- Class X-F at B (high) (sf)
-- Class F at B (sf)

With this review, DBRS Morningstar removed Classes X-F and F from Under Review with Negative Implications, where they were placed on August 6, 2020. With this review, Negative trends have been assigned to those two classes and to Classes C, D, X-E and E. All other trends remain Stable.

The Negative trends reflect DBRS Morningstar’s concerns as a result of ongoing performance issues with certain loans, specifically those in special servicing and others in the pool that are secured by hotel and retail properties, which have been disproportionately affected by the ongoing Coronavirus Disease (COVID-19) pandemic. In total, 18 loans in the transaction, representing 49.5% of the outstanding transaction balance, are backed by hotel and retail properties. As of the January 2021 reporting, four loans, representing 14.7% of the current pool balance, are in special servicing, and 10 loans, representing 11.4% of the current pool balance, are on the servicer’s watchlist.

Three of the four loans in special servicing are secured by either hotel or retail properties, including the second-largest loan in the transaction (Gurnee Mills; 9.9% of the pool), which is secured by a regional mall outside of Chicago. Two additional loans are also secured by regional malls, including Coconut Point (13.8% of the pool) and Peachtree Mall (3.2% of the pool).

As of January 2021, the transaction comprises 50 loans, totaling $698.6 million, as three of the original 53 loans have been repaid from the trust, resulting in collateral reduction of 9.0%, inclusive of payoffs and loan amortization. The transaction benefits from a concentration of office collateral as 10 loans, representing 25.6% of the pool, are secured by office properties, which have shown greater resilience to cash flow declines thus far in the pandemic. The third-largest loan in the transaction is secured by an office property in Manhattan (9 West 57th Street; 7.2% of the pool). The transaction also includes 18 loans secured by multifamily and manufactured housing community properties, representing 18.1% of the pool balance. Additionally, one loan, representing 0.5% of the pool, has been defeased.

The largest and most pivotal loan in special servicing, Gurnee Mills (Prospectus ID#2; 9.9% of the pool), is secured by a single-level enclosed regional mall totaling 1.9 million square feet (sf), of which 1.7 million sf is part of the collateral. The property is located in Gurnee, Illinois, approximately 45 miles northwest of the Chicago downtown core. Simon Property Group (Simon) owns and operates the collateral portion of the property. At issuance, the largest tenants were Sears, Bass Pro Shops, and Macy’s. The Sears was closed in 2018 and the sponsor has yet to back-fill the space. The loan transferred to the special servicer in June 2020 as a result of monetary default related to the effects of the coronavirus pandemic. The loan was last paid in April 2020, according to the January 2021 remittance. Simon has submitted a coronavirus-related relief request and, according to servicer commentary, the special servicer has come to an agreement with the borrower on a forbearance; however, the terms of the agreement have not been made public to date.

Performance of the subject property was on the decline prior to the coronavirus pandemic, with cash flow trending downward for the past three consecutive years. The 2019 year-end net cash flow (NCF) decreased 11.1% compared with year-end 2018 and declined 17.5% compared with the issuer’s NCF. DBRS Morningstar notes the increased risks for the loan from issuance given the extended delinquency, difficulty in back-filling the former Sears space, and the property’s exposure to struggling retailers, including Macy’s. Given these factors, as well as the decline in performance prior to the pandemic, DBRS Morningstar applied a stressed probability of default for this loan in the analysis for this review, increasing the expected loss.

DBRS Morningstar maintains an investment-grade shadow rating on the 9 West 57th Street loan (Prospectus ID#3; 7.2% of the pool). DBRS Morningstar confirmed that the performance of this loan remains consistent with investment-grade loan characteristics.

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.

DBRS Morningstar materially deviated from its North American CMBS Insight Model when determining the ratings assigned to Classes C and D as the quantitative results suggested a lower rating on the Classes. The material deviations are warranted, given the uncertain loan level event risk.

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 in the transaction:
-- Prospectus ID#1 – Coconut Point (13.8% of the pool)
-- Prospectus ID#2 – Gurnee Mills (9.9% of the pool)
-- Prospectus ID#3 – 9 West 57th Street (7.2% of the pool)
-- Prospectus ID#4 – Tampa Marriott Westshore (3.9% of the pool)
-- Prospectus ID#7 – Peachtree Mall (3.2% of the pool)
-- Prospectus ID#10 – Preserve at Autumn Ridge (2.8% of the pool)
-- Prospectus ID#17 – Holiday Inn & Suites Plantation (1.7% of the pool)

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 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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

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

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 696-6293

Ratings

  • Date IssuedDebt RatedRatingTrendActionAttributesi
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2016-C7, Class A-4AAA (sf)StbConfirmed
    US
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2016-C7, Class A-5AAA (sf)StbConfirmed
    US
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2016-C7, Class A-SAAA (sf)StbConfirmed
    US
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2016-C7, Class A-SBAAA (sf)StbConfirmed
    US
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2016-C7, Class BAAA (sf)StbConfirmed
    US
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2016-C7, Class X-AAAA (sf)StbConfirmed
    US
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2016-C7, Class X-BAAA (sf)StbConfirmed
    US
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2016-C7, Class CAA (low) (sf)NegTrend Change
    US
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2016-C7, Class DBBB (high) (sf)NegTrend Change
    US
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2016-C7, Class X-EBB (high) (sf)NegTrend Change
    US
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2016-C7, Class EBB (sf)NegTrend Change
    US
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2016-C7, Class X-FB (high) (sf)NegConfirmed
    US
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2016-C7, Class FB (sf)NegConfirmed
    US
    More
    Less
CSAIL 2016-C7 Commercial Mortgage Trust
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jan 21, 2021
  • Rating Action:Trend Change
  • Ratings:AA (low) (sf)
  • Trend:Neg
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jan 21, 2021
  • Rating Action:Trend Change
  • Ratings:BBB (high) (sf)
  • Trend:Neg
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jan 21, 2021
  • Rating Action:Trend Change
  • Ratings:BB (high) (sf)
  • Trend:Neg
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jan 21, 2021
  • Rating Action:Trend Change
  • Ratings:BB (sf)
  • Trend:Neg
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:B (high) (sf)
  • Trend:Neg
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:B (sf)
  • Trend:Neg
  • Rating Recovery:
  • Issued:US
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.