Morningstar DBRS Confirms Credit Ratings on All Classes of CSAIL 2016-C7 Commercial Mortgage Trust
CMBSDBRS Limited (Morningstar DBRS) confirmed its credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2016-C7 issued by CSAIL 2016-C7 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 B at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (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 credit rating confirmations reflect the transaction's stable performance, which remains in line with Morningstar DBRS' expectations. Overall, the pool continues to exhibit healthy credit metrics, as evidenced by the weighted-average (WA) debt service coverage ratio (DSCR) of 1.82 times (x), based on the most recent financial reporting available.
Although the majority of loans in the pool continue to exhibit healthy credit metrics, there is a moderate to high concentration of loans collateralized by retail and office properties (or mixed-use properties with a significant office component), which represent 41.1 % and 24.9% of the current pool balance, respectively. Those loans include Gurnee Mills (Prospectus ID#2; 11.5% of the pool) and Peachtree Mall (Prospectus ID#7; 3.1% of the pool), which are secured by regional malls that have experienced contractions in cash flow since issuance. The underlying collateral for the majority of the pool's office loans continues to demonstrate stable to improving operating performance over the last few reporting periods, with a WA debt yield and DSCR of 11.13% and 2.12x, respectively. The transaction also continues to benefit from increased credit support to the bonds because of scheduled amortization and loan repayments, further supporting the credit rating confirmations. In addition, one loan, representing 8.2% of the pool balance, is shadow-rated investment grade by Morningstar DBRS. The pool has not reported any realized losses to date and, including the $32.6 million unrated first-loss Class NR certificate, there is $65.2 million in debt to cushion against losses on the investment grade-rated certificates.
According to the June 2025 remittance, 47 of the original 53 loans remain in the transaction with a trust balance of $611.8 million, reflecting a collateral reduction of 20.2% since issuance. Thirteen loans, representing 30.4% of the pool balance, are on the servicer's watchlist; however, only four of those loans, representing 4.3% of the pool balance, are being monitored for performance-related reasons. Only one loan, representing 1.3% of the pool balance, is in special servicing and 12 loans, representing 17.4% of the pool balance, are fully defeased.
The specially serviced loan, 350-360 Fairfield Avenue (Prospectus ID#32) is secured by a two-building 130,431-square foot (sf) office complex in Bridgeport, Connecticut. The loan transferred to the special servicer in December 2021 and the property was ultimately sold in January 2025, with the buyer assuming the trust loan. As part of the assumption, a loan modification was executed, the terms of which included a five-year extension of the maturity date to November 2031. The loan is expected to return to the master servicer in the near term. According to the December 2024, rent roll, the property was 58.5% occupied with an average rental rate of $21.08 per square foot (psf). The loan has been reporting a DSCR below breakeven since 2021 and tenant leases, representing approximately 50.0% of the net rentable area (NRA), have expired or are set to roll within the next 12 months. According to Reis, Fairfield County's East submarket reported a Q1 2025 vacancy rate of 4.4% and asking rental rates of $25.70 psf. The property was most recently appraised in October 2024 at a value of $7.5 million (slightly below the current loan balance of $7.7 million), down from the May 2023 appraised value of $8.5 million and considerably below the issuance appraised value of $12.3 million. Morningstar DBRS increased the probability of default (POD) for this loan and applied a stressed loan-to-value (LTV) ratio in its analysis for this review, resulting in an expected loss (EL) that was 3.5x higher than the pool's average EL.
The second-largest loan in the pool, Gurnee Mills, is secured by a 1.68 million-sf portion of a larger 1.9 million-sf regional mall in the northwestern Chicago suburb of Gurnee, Illinois. Simon Property Group, Inc. (Simon) owns and manages the property. The property was 91.8% occupied as of December 2024, an increase from the prior year and in line with the issuance figure of 91.1%. The largest collateral tenants are Bass Pro Shops, Kohl's, and Macy's while noncollateral tenants include Marcus Cinema, Burlington Coat Factory, and Value City Furniture. Morningstar DBRS reached out to the servicer to confirm if the largest collateral tenant, Bass Pro Shops (8.2% of the NRA with a lease through December 2025 ), has provided notice of renewal, but had not received a response as of the date of this press release. According to the YE2024 financial reporting, the property generated $18.1 million of net cash flow (NCF), reflecting a DSCR of 1.7x, which is lower than the Morningstar DBRS issuance figure of $21.7 million. Morningstar DBRS analyzed the loan with an elevated POD penalty and stressed LTV ratio, resulting in an EL that was 2.5x higher than the pool's average EL.
The Peachtree Mall loan is secured by a 536,202-sf portion of a larger 821,687-sf regional mall in Columbus, Georgia. The loan is sponsored by Brookfield Property Group LLC and is being monitored on the servicer's watchlist for an upcoming maturity date in December 2025. The property was 86.1% occupied as of December 2024, down from 94.5% the prior year. Morningstar DBRS notes that the NCF has remained below issuance expectations for years, with the YE2024 figure of $7.4 million approximately 20.0% lower than the underwritten figure, suggesting that average rental rates at the property have likely declined. The two largest tenants are Macy's (26.0% of NRA with a lease through September 2027) and JCPenney (15.0% of the NRA with a lease through November 2029). Dillard's is also an anchor tenant but does not serve as collateral. Rollover risk is concentrated with leases representing about 20% of NRA scheduled to roll in the next 12 months to 18 months. According to a tenant sales report dated December 2024, total in-line tenant sales were $310.0 psf compared with $318.0 psf at YE2023. Given the increased risk associated with the upcoming tenant rollover (including the upcoming lease expiration for an anchor tenant), declining performance, and dated property condition, Morningstar DBRS analyzed this loan with a POD penalty, resulting in an EL that was more than 2.5x higher than the pool's average EL.
At issuance, Morningstar DBRS shadow-rated the 9 West 57th Street loan (Prospectus ID#3; 8.2% of the pool) investment grade supported by the loan's strong credit metrics, strong sponsorship strength, and desirable location in Manhattan's Plaza District submarket. With this review, Morningstar DBRS confirmed that the characteristics of this loan remain consistent with the investment-grade shadow rating.
Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.
Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) at https://dbrs.morningstar.com/research/454196.
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 credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.
Notes:
All figures are in U.S. dollars unless otherwise noted.
The principal methodology is North American CMBS Surveillance Methodology (February 28, 2025) https://dbrs.morningstar.com/research/448963.
Other methodologies referenced in this transaction are listed at the end of this press release.
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-DBRS@morningstar.com.
The credit rating was initiated at the request of the rated entity.
The rated entity or its related entities did participate in the credit rating process for this credit rating action.
Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.
This is a solicited credit rating.
For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings
Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.
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The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.
-- North American CMBS Multi-Borrower Rating Methodology (April 9, 2025) and North American CMBS Insight Model v 1.3.0.0
https://dbrs.morningstar.com/research/451739
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024)
https://dbrs.morningstar.com/research/439702
-- Legal Criteria for U.S. Structured Finance (December 3, 2024)
https://dbrs.morningstar.com/research/444064
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024)
https://dbrs.morningstar.com/research/438283
A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at https://dbrs.morningstar.com/research/417279.
For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.
Ratings
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