DBRS Morningstar Confirms Ratings on All Classes of CFCRE Commercial Mortgage Trust 2016-C6

DBRS, Inc. (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-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)

Classes D, E, X-E, F, and X-F continue to carry Negative trends as a reflection of the challenges faced by several of the larger loans in the pool, including four loans in the top 10, that are either specially serviced or on the servicer’s watchlist. The trends on all other rated classes are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which has generally performed in line with expectations at issuance. At issuance, the transaction consisted of 45 loans secured by commercial and multifamily properties, with an aggregate trust balance of $787.5 million. As of the October 2021 remittance, 43 loans remain in the pool including two loans (4.3% of the pool) that are defeased. The current pool balance of $740.2 million represents a collateral reduction of 6.4% from issuance resulting from amortization, the payoff of one loan, and the liquidation of one loan that resulted in the loss of $3.7 million to the trust. All of the rated classes are receiving their full interest payments. Class G (not rated by DBRS Morningstar) reported an interest shortfall of $561,147 as of the October 2021 remittance.

There are five loans in special servicing, representing 10.4% of the current pool balance. The largest loan in special servicing, Waterstone 7 Portfolio (Prospectus ID#8; 3.0% of pool), is secured by a portfolio of seven retail properties totaling 279,937 square feet across New Hampshire (six properties) and Massachusetts (one property). The loan transferred to special servicing in early 2018 as a result of a nonpermitted equity transfer. The loan was pending a return to the master servicer in early 2020. However, the portfolio’s performance declined shortly thereafter as a result of the Coronavirus Disease (COVID-19) pandemic after the borrower indicated that approximately 70% of its tenants were closed because of the pandemic. The borrower brought the loan current instead of pursuing pandemic relief. Since then, the borrower has initiated a lawsuit seeking a declaratory judgment that the loan is no longer in default.

The most recent year-end reporting from 2019 showed the portfolio’s net cash flow (NCF) was in line with issuance levels while covering at a debt service coverage ratio (DSCR) of 1.28 times (x). The most recent appraisal, dated June 2021, valued the portfolio at $25.6 million, down 27% from the appraised value of $34.9 million at issuance. The updated value results in a loan-to-value ratio (LTV) of 87.6%.

The second-largest loan in special servicing, Inn at the Colonnade (Prospectus ID#10; 2.9% of pool), is secured by the borrower's fee-simple interest in a 125-room full-service hotel in Baltimore, directly across from Johns Hopkins University. The loan transferred to special servicing in March 2020 because of imminent monetary default, but as of October 2021, the servicer reported the loan as pending return to master servicer with no modification. An April 2021 STR report showed that the property has performed well among its competitors, with penetration rates exceeding 100% in each of the three categories based on the trailing three months figures ended March 2021. During this time, the property had reported occupancy, average daily rate, and revenue per available room of 71.2%, $99.15, and $71.53, respectively, which compared well against the competitive set’s respective figures of 32.4%, $82.42, and $26.67, respectively. The most recent appraisal, dated June 2021, valued the property at $24.2 million, down 28% from the appraised value of $33.8 million at issuance. The updated value reflects an LTV of 88.4%.

There are 10 loans, representing 19.1% of the current pool balance, on the servicer’s watchlist. The loans are being monitored for various reasons including low DSCRs, occupancy declines, and/or coronavirus-relief requests. The largest of which, 7th & Pine Seattle Retail & Parking (Prospectus ID#4; 8.0% of pool), is secured by 950-stall parking garage and ground-level retail within the Seattle CBD. The loan transferred to special servicing in May 2020 for imminent monetary default but transferred back to the master servicer the following month unchanged. As of the October 2021 remittance, the loan continues to be on the servicer’s watchlist for performance-related concerns as a result of the pandemic. The property's 2020 NCF was down 66.8% year over year and down 72.8% compared with issuance. The loan had a DSCR of 0.46x as of YE2020.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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#4 – 7th & Pine Seattle & Parking (8.0% of the pool)
-- Prospectus ID#8 – Waterstone 7 Portfolio (3.0% of the pool)
-- Prospectus ID#10 – Inn at the Colonnade (2.9% 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 26, 2021), 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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.

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 [email protected].

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