DBRS Morningstar Upgrades One Class of CSAIL 2016-C5 Commercial Mortgage Trust

DBRS Limited (DBRS Morningstar) upgraded one class of Commercial Mortgage Pass-Through Certificates, Series 2016-C5 issued by CSAIL 2016-C5 Commercial Mortgage Trust as follows:

-- Class C to AA (low) (sf) from A (sf)

In addition, DBRS Morningstar confirmed the remaining classes in the transaction 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 (high) (sf)
-- Class B at AA (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)

All trends are Stable.

The upgrade to Class C reflects the increased credit support to the bonds as a result of the repayment of one loan and additional defeasance of five loans since DBRS Morningstar’s last rating action in November 2022. DoubleTree Commerce (previously 3.1% of the pool) was previously specially serviced and was successfully repaid in November 2022 with a better-than-expected recovery. The rating confirmations and Stable trends reflect DBRS Morningstar’s expectations for the transaction’s continued stable performance.

The trust consists of 48 of the original 59 loans, with an aggregate principal balance of $624.1 million, reflecting a collateral reduction of 33.4% since issuance. As of the March 2023 remittance, 19 loans, representing 26.5% of the pool, are fully defeased, an increase from 22.1% at the time of the last rating action. As of the March 2023 remittance, there are two loans, representing 5.1% of the pool, in special servicing.

The largest specially serviced loan, Sheraton Lincoln Harbour Center (Prospectus ID#12, 3.2% 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 and remains delinquent. The sponsor is no longer supporting operations at the hotel and the special servicer is pursuing foreclosure while dual tracking a potential sale of the asset with the help of an in-place receiver. An appraisal dated August 2022 valued the property at $79.0 million, representing a 9.6% decline from the March 2021 value of $87.4 million and a 38.3% decline from the issuance value of $128.0 million. DBRS Morningstar’s analysis included a liquidation scenario that was based on a stress to the most recent appraised value to account for additional advances and the potential for further value decline, resulting in a loss severity in excess of 35.0%.

The second specially serviced loan, Frisco Plaza (Prospectus ID#23, 1.9% 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%. This resulted in cash flow shortfalls and an eventual default on the loan payments. The asset is now real estate owned. A November 2022 appraisal valued the property at $12.9 million, up from the February 2022 value of $10.8 million but still 30.3% below the issuance appraised value of $18.5 million. DBRS Morningstar’s analysis included a liquidation scenario that was based on a stress to the most recent appraised value to account for additional advances and the potential for further value declines, resulting in a loss severity in excess of 30.0%.

The remaining pooled assets are generally well diversified by property type. The largest property type represented is multifamily, totaling 28.4% of the pool, followed by office (19.0%), industrial (17.6%), retail (16.7%), and lodging (11.2%). All of the outstanding loans, including defeased assets, are scheduled to mature in the second half of 2025.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929 (May 17, 2022).

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.

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

The principal methodology is North American CMBS Surveillance Methodology (March 16, 2023; https://www.dbrsmorningstar.com/research/410912).

Other methodologies referenced in this transaction are listed at the end of this press release.

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 rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action.

DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

North American CMBS Multi-Borrower Rating Methodology (March 16, 2023)/North American CMBS Insight Model v 1.1.0.0 (https://www.dbrsmorningstar.com/research/410913)

Rating North American CMBS Interest-Only Certificates (December 19, 2022)
https://www.dbrsmorningstar.com/research/407577/rating-north-american-cmbs-interest-only-certificates

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 12, 2022)
https://www.dbrsmorningstar.com/research/402646/dbrs-morningstar-north-american-commercial-real-estate-property-analysis-criteria

North American Commercial Mortgage Servicer Rankings (September 8, 2022)
https://www.dbrsmorningstar.com/research/402499/north-american-commercial-mortgage-servicer-rankings

Interest Rate Stresses for U.S. Structured Finance Transactions (August 30, 2022)
https://www.dbrsmorningstar.com/research/402153/interest-rate-stresses-for-us-structured-finance-transactions

Legal Criteria for U.S. Structured Finance (December 7, 2022)
https://www.dbrsmorningstar.com/research/407008/legal-criteria-for-us-structured-finance

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].