DBRS Morningstar Confirms All Classes of Morgan Stanley Bank of America Merill Lynch Trust 2016-C29; Six Classes Carry Negative Trends

DBRS Limited (DBRS Morningstar) confirmed its ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2016-C29 (the Certificates) issued by Morgan Stanley Bank of American Merrill Lynch Trust 2016-C29:

-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (high) (sf)
-- Class X-D at BBB (high) (sf)
-- Class D at BBB (sf)
-- Class X-E at BBB (low) (sf)
-- Class E at BB (high) (sf)
-- Class X-F at BB (sf)
-- Class F at BB (low) (sf)
-- Class X-G at B (sf)
-- Class G at B (low) (sf)

Classes E, X-E, F, X-F, G and X-G carry Negative trends. All other trends are Stable.

With this review, DBRS Morningstar removed Classes E, X-E, F, X-F, G, and X-G from Under Review with Negative Implications, where they were placed on August 6, 2020.

The rating confirmations reflect the overall stable performance of the transaction since issuance, when the transaction consisted of 69 fixed-rate loans secured by 106 commercial and multifamily properties. The initial trust balance of $809 million has been reduced to $765.3 million as of the January 2021 remittance, with 67 of the original 69 loans remaining in the pool, seven of which have been defeased, representing 9.1% of the pool balance. The transaction is concentrated by property type as 24 loans, representing 38.0% of the current trust balance, are secured by retail collateral; office properties back the second-largest concentration of loans, with five loans representing 15.0% of the current trust balance.

The Negative trends reflect the DBRS Morningstar outlook for some of the loans on the servicer’s watchlist and in special servicing. As of the January 2021 remittance, 19 loans, representing 22.1% of the pool, are on the servicer’s watchlist, and there are seven loans, representing 10.1% of the pool in special servicing. The loans on the watchlist are being monitored for a variety of issues including low debt service coverage ratios (DSCRs), occupancy-related issues, deferred maintenance, delinquency, and upcoming loan maturity. The seven loans in special servicing include two top-10 loans backed by full-service hotels, among other loans backed by anchored retail, industrial, and limited-service hotel property types.

The largest loan in special servicing is Radisson Hotel Freehold (Prospectus ID#8; 2.6% of the pool),secured by a 121-key full-service hotel in Freehold, New Jersey. The loan was transferred to special servicing in November 2020 for imminent monetary default at the borrower’s request, who cited financial difficulties as a result of the Coronavirus Disease (COVID-19) pandemic. As of the January 2021 remittance, the loan was listed as 60-89 days delinquent, where it has generally hovered since June 2020. The servicer and borrower are discussing a potential forbearance agreement, but nothing has been finalized to date. The servicer most recently reported a trailing 12 month (T-12) ended June 2020 DSCR of 1.08x, down from the year-end (YE) 2019 DSCR of 2.18 times (x) and the YE2018 DSCR of 2.19x.

The second-largest loan in special servicing is Le Meridien Cambridge MIT (Prospectus ID#9; 2.6% of the pool). The loan is secured by a leasehold interest in a 210-key full-service hotel located five miles east of the Boston central business district, adjacent to the Massachusetts Instititute of Technology (MIT) campus. The loan was transferred to special servicing in April 2020 for imminent monetary default as a result of cash flow disruptions driven by the coronavirus pandemic and as of the January 2021 remittance, was listed as 30-59 days delinquent. A forbearance agreement was executed in August 2020, which deferred its debt service payments and various other reserve requirements for a nine-month period. The loan was also granted a 12-month extension for the December 2020 maturity date. It was also noted by the special servicer that the sponsor continued to make voluntary debt service payments from September through November. The servicer most recently reported a T-12 ended June 2020 DSCR of 0.67x, down from the YE2019 DSCR of 1.50x.

The largest loan on the servicer’s watchlist is Sheraton Harborside Portsmouth (Prospectus ID#6; 3.6% of the pool), which is being monitored for a low DSCR of -0.17x at the T-12 ended September 2020, and delinquent insurance payments. The collateral is a 167-key portion of the 180-key full-service hotel in downtown Portsmouth, New Hampshire. To date, the borrower has not submitted a relief request to the servicer and the loan remains current as of the January 2021 remittance.

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-D, X-E, X-F and X-G 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#8 – Radisson Hotel Freehold (2.6% of the pool)
-- Prospectus ID#9 – Le Meridien Cambridge MIT (2.6% of the pool)
-- Prospectus ID#22 – Wabash Landing Retail (1.4% of the pool)
-- Prospectus ID#28 – Crossings at Halls Ferry (1.2% 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 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.

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.

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