Morningstar DBRS Downgrades Credit Ratings on Five Classes of COMM 2016-CCRE28 Mortgage Trust, Changes Trends on Three Classes to Negative From Stable

DBRS, Inc. (Morningstar DBRS) downgraded its credit ratings on five classes of Commercial Mortgage Pass-Through Certificates, Series 2016-CCRE28 issued by COMM 2016-CCRE28 Mortgage Trust as follows:

-- Class C to BB (high) (sf) from A (sf)
-- Class D to CCC (sf) from BBB (low) (sf)
-- Class E to C (sf) from B (low) (sf)
-- Class X-B to BBB (low) (sf) from A (high) (sf)
-- Class X-C to C (sf) from B (sf)

In addition, Morningstar DBRS confirmed the following credit ratings:

-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-HR at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-HR at AAA (sf)
-- Class XP-A at AAA (sf)
-- Class B at AA (sf)
-- Class F at C (sf)
-- Class G at C (sf)
-- Class H at C (sf)
-- Class X-D at C (sf)
-- Class X-E at C (sf)

Morningstar DBRS also changed the trends on Classes B, X-B, and C to Negative from Stable. All other trends are Stable, with the exception of Classes D, E, F, G, H, X-C, X-D, and X-E, which have credit ratings that do not typically carry trends in commercial mortgage-backed securities (CMBS) credit ratings.

The credit rating downgrades on Classes D and E reflect Morningstar DBRS' increased loss projections driven by an updated appraisal for the sole loan in special servicing, 1155 Market Street (Prospectus ID#8, 6.7% of the pool), which was made available with the July 2025 remittance report. Morningstar DBRS also considered a hypothetical liquidation scenario for another loan, 32 Avenue of the Americas (Prospectus ID#4, 7.9% of the pool), given year-over-year declines in performance and the loan maturity next year. Morningstar DBRS' total estimated liquidated losses of $80.9 million are an increase from the $61.6 million figure analyzed with the previous credit rating action in May 2025. Morningstar DBRS now estimates that realized losses are likely to erode the full balance of Class D and approximately 25% of the Class E certificate, reducing the credit enhancement on the junior bonds, a primary consideration in the credit rating downgrades on Classes C, D, and E. While Morningstar DBRS expects that most of the maturing loans are likely to successfully refinance, six loans, representing approximately 27.5% of the current pool balance, were identified as being at increased risk of maturity default based on concentrated upcoming rollover or recent declines in performance. While Class C would be insulated from losses based on the current liquidated loss projections, the credit rating downgrade and Negative trend on this class reflect the increased credit risks for those loans and reduced credit support implied by the liquidation scenarios analyzed with this review.

As of the July 2025 remittance, 36 of the original 49 loans remained in the trust, with an aggregate balance of $721.6 million, representing a collateral reduction of 29.7% since issuance. There are 10 fully defeased loans, representing 21.8% of the current pool balance. There are 25 loans on the servicer's watchlist that represent 71.5% of the pool, including the largest loan in the pool. The loans on the watchlist are primarily being monitored for upcoming maturity and/or debt service coverage ratio (DSCR) declines. By property type, excluding defeasance, the pool is most concentrated by loans backed by office properties, which represent 33.6% of the pool, followed by loans collateralized by retail and lodging properties, which represent 16.1% and 9.4% of the pool, respectively.

The 1155 Market Street loan is secured by a 142,672-square-foot (sf) portion of an 11-story Class A office building and a 16-space parking garage in San Francisco. The loan transferred to the special servicer in March 2024 for imminent monetary default after the sole tenant, City and County of San Francisco, vacated its space in May 2024 prior to the January 2028 lease expiry. As per the servicer's latest commentary, a receiver was appointed in June 2024, and the property is currently being marketed for lease. The property was reappraised in March 2025 at a value of $7.1 million, a substantial decline of 91.1% from the issuance appraised value of $80.0 million. Morningstar DBRS liquidated the loan in its analysis based on a standard 20% haircut to the most recent value. Including the outstanding advances and expected servicer expenses, Morningstar DBRS' liquidation scenario suggests a loss of just under $46.0 million, with a loss severity approaching 100%.

The second-largest loan in the pool, 32 Avenue of the Americas (Prospectus ID#4, 7.9% of the pool), is secured by a 1.2 million-sf dual office and data center property in Manhattan's Tribeca district. The 10-year interest-only (IO) loan is scheduled to mature in November 2025. It is one of five pari passu pieces of a $425.0 million whole loan, with other senior portions securitized in JPMCC 2015-JP1 and JPMBB 2015-C33, which Morningstar DBRS also rates. The loan was added to the servicer's watchlist in April 2023 because of concerns about occupancy, which has trended downward year over year as tenants continue to depart at lease expiration. In addition, Cedar Cares Inc. (5.7% of the net rentable area) previously planned to expand its footprint at the property; however, the tenant has not grown as expected and is now looking to sublease the 17th floor. As of the YE2024 financials, the property was 56.9% occupied, down from 60.5% at YE2023 and 95.0% at issuance. Because of the drop in occupancy, the DSCR has also been declining, with the YE2024 DSCR reported at 0.97 times (x), compared with the YE2023 DSCR of 1.03x and the Morningstar DBRS DSCR of 1.82x derived at issuance. According to Reis, as of Q1 2025, office properties in the South Broadway submarket reported a vacancy rate of 13.9%, with an average rental rate of $73.01 per sf (psf) compared with the property's average rental rate of $74.43 psf. Given the sustained performance declines over the past several years, Morningstar DBRS expects the borrower will be required to commit significant equity to secure a replacement loan. Given the general challenges for the office market, particularly for borrowers seeking financing for underperforming assets, Morningstar DBRS liquidated the loan based on a 75% haircut to the issuance appraised value of $770.0 million; including anticipated expenses, the hypothetical liquidation resulted in an implied loss of approximately $35.1 million.

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 factors 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-C, X-D, X-E, X-HR, and XP-A are 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 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 17g-7 disclosure report and/or the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

As applicable, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' outlooks and credit ratings are monitored.

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

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)/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

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.