DBRS Morningstar Changes Trends on Four Classes, Confirms All Ratings of CSAIL 2016-C5 Commercial Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2016-C5 issued by CSAIL 2016-C5 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 X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class X-D at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class X-E at BB (sf)
-- Class E at BB (low) (sf)
-- Class X-F at B (sf)
-- Class F at B (low) (sf)

DBRS Morningstar changed the trends on Classes D, E, X-D, and X-E to Stable from Negative. The trends on Classes F and X-F remain Negative, reflecting the continued performance challenges of the loans that remain in special servicing. All other trends are Stable. The trend change reflects DBRS Morningstar’s lowered loss expectations for the pool since the last rating action following the reinstatement of Embassy Suites and Claypool Court (Prospectus ID#7, 4.3% of the pool), which was returned to the master servicer in November 2021. DBRS Morningstar also notes the better-than-expected resolution of two other loans previously in special servicing. Holiday Inn Austin (Prospectus ID#21, previously 1.8% of the pool) was successfully repaid in full, and University Plains (Prospectus ID#17, previously 2.4% of the pool) was liquidated at a loss lower than DBRS Morningstar had anticipated.

The trust consists of 51 of the original 59 loans, with an aggregate principal balance of $662.1 million, reflecting a collateral reduction of 29.3% since issuance. In addition, seven loans, representing 8.9% of the pool, are fully defeased. The pool is well diversified by property type, with the three largest concentrations being multifamily (23.1% of the current pool), office (18.2% of the current pool), and industrial (16.7% of the current pool).

As of the April 2022 reporting, there are three loans, representing 5.5% of the current trust, in special servicing. Four loans, representing 5.7% of the pool, are delinquent. The largest specially serviced loan, Sheraton Lincoln Harbour Center (Prospectus ID#12, 3.0% of the current pool), is secured by a 343-room full-service hotel in Weehawken, New Jersey. The loan transferred to special servicing in January 2021 because of imminent default and remains delinquent. The sponsor is no longer supporting operations at the hotel and is co-operating with the foreclosure process. The special servicer rejected the initial discounted payoff offer. A modified offer was made in September 2021 and is being evaluated. The property reported an occupancy rate of 65.9% at YE2021, a significant increase from 33.0% at YE2020. Cash flows remain negative, resulting in a depressed debt service coverage ratio.

The second-largest specially serviced loan, Frisco Plaza (Prospectus ID#23, 1.8% of the pool), is secured by a 61,453-square-foot retail property in Frisco, Texas. The loan transferred to special servicing in April 2019 for imminent default after the former largest tenant, LA Fitness (previously 73.2% of net rentable area) defaulted on the terms of its lease by failing to pay rent. Although the borrower was subsequently able to bring the loan current, LA Fitness vacated at lease expiration in March 2021, bringing occupancy down to 16.5%. The significant occupancy decrease resulted in the borrower defaulting again on debt service payments as a result of cash flow shortfalls. The asset is now real estate owned. A February 2022 appraisal valued the property at $10.8 million, a 41.6% decrease from $18.5 million at issuance, and below the current loan balance of $12.1 million. The special servicer is evaluating disposition strategies.

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-D, 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.

The DBRS Morningstar Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com

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

The principal methodology is North American CMBS Surveillance Methodology (March 4, 2022), 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.

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 [email protected].

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 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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