Fitch Assigns Final Ratings to CGGS Commercial Mortgage Trust 2016-RND

CHICAGO--()--Fitch Ratings has assigned the following ratings and Rating Outlooks to the CGGS Commercial Mortgage Trust 2016-RND pass through certificates, series 2016-RND:

Pool A
--$607,700,000a class A-FX certificates 'AAAsf'; Outlook Stable;
--$134,300,000a class B-FX certificates 'AA-sf'; Outlook Stable;
--$78,000,000a class C-FX certificates 'A-sf'; Outlook Stable;
--$122,000,000a class D-FX certificates 'BBB-sf'; Outlook Stable;
--$173,000,000a class E-FX certificates 'BB-sf'; Outlook Stable.

Pool B
--$417,500,000a class A-FL certificates 'AAAsf'; Outlook Stable;
--$93,500,000a class B-FL certificates 'AA-sf'; Outlook Stable;
--$57,000,000a class C-FL certificates 'A-sf'; Outlook Stable;
--$90,000,000a class D-FL certificates 'BBB-sf'; Outlook Stable.

a Privately placed pursuant to Rule 144A.

Fitch does not rate the P-FX and P-FL classes, which have been added to the capital structure. Fitch has withdrawn its expected ratings on the class X-FX-CP, X-FX-NCP, X-FL-CP, and X-FL-NCP certificates as the capital structure no longer includes these classes.

The certificates represent the beneficial interest in a trust that holds two loans, each consisting of a separate collateral pool and secured primarily by lab office properties. The two loans in the trust consist of:

--One five-year, fixed-rate, interest-only $1.115 billion mortgage loan secured by the fee and leasehold interests in 30 lab office properties and one multifamily property with a total of 4.6 million square feet (sf) (Pool A);
--One two-year, floating-rate, interest-only $658 million mortgage loan secured by the fee and leasehold interests in 28 lab office properties with a total of 4 million sf (Pool B).

Proceeds from the loans were used to facilitate Blackstone Real Estate Partners VIII's acquisition of BioMed Realty Trust Inc. (BioMed), a public REIT that owns, manages, and develops office and laboratory space. On Jan. 27, 2016, Blackstone and certain of its affiliates and subsidiaries completed the acquisition of BioMed for total consideration of approximately $8.8 billion. The properties securing the loans represent a substantial portion of BioMed's stabilized lab office portfolio.

KEY RATING DRIVERS
High Quality Assets: Both Pool A and Pool B are collateralized by portfolios of high-quality lab office properties located in highly desirable and in-fill life science submarkets. Pool A received a weighted average (WA) Fitch property quality grade of 'A-/B+' and over one-half (as a percentage of NOI) of the properties were built since 2000. Pool B received a WA Fitch property quality grade of 'B+' and approximately 75% of properties were built since 2000.

Pool Diversity: Pool A is collateralized by the fee (28) and leasehold (three) interests in 31 (4.6 million sf) properties located across three states and four distinct markets. Pool B is collateralized by the fee (25) and leasehold (three) interests in 28 (4 million sf) lab office buildings located across 10 states. The largest tenant exposure for Pool A is 10.9% by total base rent (Ironwood Pharmaceuticals, Inc.), while Pool B is more concentrated with its largest individual exposure at 36.9% (Regeneron Pharmaceuticals, Inc.).

Trust Leverage: Pool A's Fitch stressed DSCR and LTV for the $1.115 billion mortgage loan are 1.04x and 86.4%, respectively. Pool B's Fitch stressed DSCR and LTV for the $658 million trust mortgage loan are 1.30x and 69.2%, respectively.

Institutional Sponsorship: The sponsor of the loans will be Blackstone Real Estate Partners VIII, which is owned by affiliates of the Blackstone Group, L.P. (Blackstone; rated 'A+/F1'). As of Sept. 30, 2015, Blackstone had more than $330 billion in assets under management.

RATING SENSITIVITIES
Fitch found that Pool A could withstand a 73.9% decline in value and an approximate 53% decline in Fitch's implied net cash flow prior to experiencing $1 of loss to the 'AAAsf' rated class. Pool B could withstand a 74.7% decline in value and an approximate 56.1% decline in Fitch's implied net cash flow prior to experiencing $1 of loss to the 'AAAsf' rated class. Fitch performed several stress scenarios in which the Fitch net cash flow (NCF) was stressed.

Fitch evaluated the sensitivity of the ratings for class A-FX and found that a 10% decline in Fitch's implied NCF would result in a one-category downgrade, while a 36% decline would result in a downgrade to below investment grade. Fitch also evaluated the sensitivity of the ratings for class A-FL and found that a 10% decline in Fitch's implied NCF would result in a one-category downgrade, while a 37% decline would result in a downgrade to below investment grade.

The Rating Sensitivity section in the presale report includes a detailed explanation of additional stresses and sensitivities. Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report. The presale report is available to all investors on Fitch's web site 'www.fitchratings.com'.

DUE DILIGENCE USAGE
Fitch was provided with third-party due diligence information from Ernst & Young LLP. The third-party due diligence information was provided on ABS Due Diligence Form-15E and focused on a comparison and re-computation of certain characteristics with respect to the mortgage loan and related mortgaged properties in the data file. Fitch considered this information in its analysis, and the findings did not have an impact on our analysis.

Additional information is available at www.fitchratings.com.

Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 27 Aug 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=870009
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952
Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=735382

Related Research
CGGS Commercial Mortgage Trust 2016-RND -- Appendix
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878426

Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1001718
ABS Due Diligence Form 15E 1
https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=1001718&flm_nm=15e_1001718_1.pdf
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1001718
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Ryan Frank
Senior Director
+1-312-368-3133
Fitch Ratings, Inc.
70 West Madison St.
Chicago, IL 60602
or
Secondary Analyst
Brook Sutherland
Senior Director
+1-312-606-2346
or
Committee Chairperson
Robert Vrchota
Managing Director
+1-312-368-3336
or
Media Relations
Sandro Scenga, New York, +1 212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Ryan Frank
Senior Director
+1-312-368-3133
Fitch Ratings, Inc.
70 West Madison St.
Chicago, IL 60602
or
Secondary Analyst
Brook Sutherland
Senior Director
+1-312-606-2346
or
Committee Chairperson
Robert Vrchota
Managing Director
+1-312-368-3336
or
Media Relations
Sandro Scenga, New York, +1 212-908-0278
sandro.scenga@fitchratings.com