DBRS Morningstar Confirms All Classes of CSAIL 2016-C5 Commercial Mortgage Trust

DBRS, Inc. (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)

The trends on Classes D, E, F, X-D, X-E, and X-F are Negative, reflecting the continuing performance challenges to the underlying collateral, many of which have been driven by the impact of the Coronavirus Disease (COVID-19) pandemic. The trends on all other classes are Stable.

The rating confirmations reflect the relatively stable performance of the transaction, which has remained in line with DBRS Morningstar’s expectations from last review. At issuance, the transaction consisted of 59 loans with an original trust balance of $936.4 million. As of the June 2021 remittance report, 53 loans remain in the transaction with a current trust balance of $699.5 million, representing a collateral reduction of approximately 25.3% since issuance resulting from amortization, the payoff of five loans, and the liquidation of one loan. In addition, four loans, representing 4.5% of the pool, have defeased. The transaction benefits from a favorable pool composition as 13 loans, representing 28.5% of the current trust balance, are secured by multifamily properties, followed by hospitality properties, (which account for 16.4% of the pool) and industrial properties (which account for 13.6% of the pool).

As of the June 2021 remittance there are six loans in special servicing representing 13.6% of the pool. The largest loan in special servicing is the Embassy Suites and Claypool Court (Prospectus ID#7, 4.1% of the pool), which is secured by a 360-room hotel that includes 77,121 square feet of office and retail space and is located within the Indianapolis CBD. The office and retail components make up the first three floors while the hotel operates in floors four through 15. The loan transferred to special servicing in October 2020 due to payment default after the borrower requested coronavirus relief. A recent proposal submitted by the borrower is under review. The loan had maintained stable performance prior to the pandemic. While year-end 2019 net cash flow (NCF) was down 5%, revenue was up 13% compared with issuance. Further, the loan maintained a strong debt service coverage ratio of 2.28 times during that timeframe. The property was reappraised in December 2020 for $53.2 million, reflecting a relatively low loan-to-value ratio of 53.8%. Given the loan’s current delinquency and request for relief, the loan was analyzed with a significant probability of default penalty to increase the expected loss in the analysis for this review

The second-largest loan in special servicing, Sheraton Lincoln Harbor Hotel (Prospectus ID#12, 2.9% of the pool), is secured by a 358-key full-service hotel in Weehawken, New Jersey. The loan transferred to special servicing in January 2021 for imminent default. The servicer has confirmed the borrower will no longer be funding shortfalls and has expressed a desire to transfer the title to the property to the trust. The hotel’s performance was deteriorating prior to the pandemic, with the year-end (YE) 2019 NCF down 24.7% compared with issuance. The March 2021 appraisal obtained by the special servicer estimated an as-is value of $87.4 million, which reflects a 31.7% decrease from the issuance appraisal of $128.0 million. Given the hotel’s challenges prior to the onset of the pandemic and the likelihood that the property will continue to struggle even as travel begins to increase, DBRS Morningstar believes the as-is value could further deteriorate and assumed a conservative haircut to the March 2021 value in the liquidation analysis, which resulted in a loss severity in excess of 23.0%.

As of the June 2021 remittance, 10 loans, representing 11.7% of the pool, are on the servicer’s watchlist. The majority of the watchlisted loans are being monitored for cash flow concerns that have generally been driven by disruptions related to the pandemic.

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 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. 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 North American CMBS Surveillance Methodology (March 26, 2021), 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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277