DBRS Morningstar Changes Trends on Two Classes, Confirms All Ratings on CSAIL 2016-C6 Commercial Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2016-C6 issued by CSAIL 2016-C6 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)

In addition to the rating confirmations, DBRS Morningstar changed the trend on Classes E and X-E to Stable from Negative. All other trends are Stable, with the exception of Classes X-F and F, which carry Negative trends. The rating confirmations and trend changes for Classes E and X-E are driven by the continued stable performance of the majority of the pool and the ongoing restabilization of loans previously in special servicing or on the servicer’s watchlist.

The trust consists of 44 of the original 50 loans with an aggregate principal balance of $544.4 million, reflecting a collateral reduction of 29.1% since issuance. In addition, six loans, representing 5.4% of the pool, are fully defeased. Since the last rating action, three loans previously in special servicing have been resolved and returned to the master servicer. As of the May 2022 reporting, there are no specially serviced or delinquent loans. Five loans, representing 8.2% of the current pool, are on the servicer’s watchlist, down from 12 watchlisted loans at the last rating action.

The largest watchlisted loan, Palihouse Santa Monica (Prospectus ID#12; 3.3% of the current pool), is secured by a 38-room, full-service hotel in Santa Monica, California. The property is four blocks from Santa Monica Boulevard and close to the beach. The hotel’s performance deteriorated significantly in 2020 as a result of the pandemic. The YE2020 debt service coverage ratio (DSCR) dropped to -0.10 times (x) from 1.35x at YE2019, but improved to 0.72x as of YE2021, indicating restabilization of occupancy and revenues. Despite significant operating shortfalls over the past two years, the loan has never been delinquent.

DBRS Morningstar maintained the Negative trends on Classes F and X-F to reflect ongoing concerns with the second-largest loan in the pool, Quaker Bridge Mall (Prospectus ID#3; 12.2% of the current pool), which was previously in special servicing. The loan is secured by 357,221 square feet (sf) of a 1.1 million sf, Simon-operated regional mall in Lawrenceville, New Jersey. It returned to the master servicer in November 2021 as a corrected mortgage loan and has been brought current on debt service payments. For the trailing nine months ended September 30, 2021, the loan reported a DSCR of 1.61x compared with its pre-pandemic DSCR of 1.79x at YE2019. The mall is anchored by Macy’s and J.C. Penney, neither of which are included as collateral. Another two anchor pads, one of which is collateral, were previously occupied by Lord & Taylor and Sears, but are now vacant. The second-largest collateral tenant, Old Navy (5.1% of net rentable area (NRA)), had a lease expiration in March 2022 but remains at the property, according to the mall’s website. The remaining four of the top five collateral tenants (18.7% of NRA) have lease expirations in January 2023, with a total of 34.1% of NRA scheduled to roll in 2023.

A February 2021 appraisal valued the mall at $168.0 million, down from the issuance appraised value of $333.0 million. DBRS Morningstar further stressed the most recent appraised value to test the durability of the ratings and believes that any potential trust loss related to this loan would be contained to the unrated class. The Negative trends reflect DBRS Morningstar’s concerns regarding the possibility of further credit deterioration given the continued vacancy of two of the four anchor pads as well as upcoming lease rollovers.

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.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for this transaction.

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 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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