NEW YORK--(BUSINESS WIRE)--Link to Fitch Ratings' Report: CFCRE 2016-C7 Mortgage Trust (US CMBS) https://www.fitchratings.com/site/re/891061
Fitch Ratings has issued a presale report on CFCRE Commercial Mortgage Trust 2016-C7 commercial mortgage pass-through certificates.
Fitch expects to rate the transaction and assign Rating Outlooks as follows:
--$20,266,000 class A-1 'AAAsf'; Outlook Stable;
--$28,337,000 class A-SB 'AAAsf'; Outlook Stable;
--$184,000,000 class A-2 'AAAsf'; Outlook Stable;
--$224,436,000 class A-3 'AAAsf'; Outlook Stable;
--$457,039,000a class X-A 'AAAsf'; Outlook Stable;
--$77,534,000a class X-B 'AA-sf'; Outlook Stable;
--$32,645,000a class X-C 'A-sf'; Outlook Stable;
--$42,439,000 class A-M 'AAAsf'; Outlook Stable;
--$35,095,000 class B 'AA-sf'; Outlook Stable;
--$32,645,000 class C 'A-sf'; Outlook Stable;
--$35,094,000ab class X-D 'BBB-sf'; Outlook Stable;
--$16,323,000ab class X-E 'BB-sf'; Outlook Stable;
--$7,346,000ab class X-F 'B-sf'; Outlook Stable;
--$35,094,000b class D 'BBB-sf'; Outlook Stable;
--$16,323,000b class E 'BB-sf'; Outlook Stable;
--$7,346,000b class F 'B-sf'; Outlook Stable.
The following classes are not expected to be rated:
--$26,932,725ab class X-G;
--$26,932,725b class G.
a) Notional amount and interest only.
b) Privately placed pursuant to Rule 144A.
The expected ratings are based on information provided by the issuer as of Nov. 28, 2016.
The certificates represent the beneficial ownership interest in the trust, primary assets of which are 37 loans secured by 64 commercial properties having an aggregate principal balance of $652,913,725 as of the cut-off date. The loans were contributed to the trust by Cantor Commercial Real Estate Lending, L.P., Societe Generale, and UBS AG, New York Branch.
Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 77.6% of the properties by balance, asset summary reviews on 100.0% of the pool, and cash flow analysis of 89.8% of the pool.
KEY RATING DRIVERS
Fitch Leverage: The transaction has slightly better leverage than other recent Fitch-rated transactions. The Fitch loan-to-value (LTV) for the trust of 103.0% is below the year-to-date (YTD) 2016 average of 105.5%. The Fitch debt service coverage ratio (DSCR) for the trust of 1.19x is similar to the YTD 2016 average of 1.20x. Excluding credit opinion loans, the pool's Fitch DSCR and LTV are 1.13x and 110.2%, respectively. Comparatively, the YTD 2016 average Fitch DSCR and LTV for Fitch-rated deals excluding credit-opinion and co-op loans are 1.16x and 109.9%.
Above-Average Pool Concentration: The top 10 loans comprise 61.9% of the pool, which is greater than the recent averages of 54.6% for YTD 2016 and 49.3% for 2015. Additionally, the loan concentration index (LCI) and sponsor concentration index (SCI) are 488 and 548, respectively, greater than the respective YTD 2016 averages of 421 and 494.
Investment-Grade Credit-Opinion Loans: Two loans in the pool, Hilton Hawaiian Village (8.7% of pool) and Potomac Mills (6.2% of pool), have investment-grade credit opinions. Hilton Hawaiian Village has an investment-grade credit opinion of 'BBB-sf*' on a stand-alone basis. Potomac Mills has an investment-grade credit opinion of 'BBBsf*' on a stand-alone basis. The two loans have a weighted average Fitch DSCR and LTV of 1.56x and 62.0%, respectively. The proportion of credit-opinion loans in this pool of 14.9% is well above the YTD 2016 average of 7.7%.
Limited Amortization: Based on the scheduled balance at maturity, the pool will pay down by only 7.8%, which is below the YTD 2016 average of 10.5%. Twelve loans, representing 50.5% of the pool, are full-term interest only, and nine loans, representing 15.6% of the pool, are partial interest only. The remainder of the pool is made up of 16 balloon loans, representing 33.9% of the pool, with loan terms of five to 10 years.
RATING SENSITIVITIES
For this transaction, Fitch's net cash flow (NCF) was 17.7% below the most recent year's net operating income (NOI; for properties for which a full-year NOI was provided, excluding properties that were stabilizing during this period). Unanticipated further declines in property-level NCF could result in higher defaults and loss severities on defaulted loans and in potential rating actions on the certificates.
Fitch evaluated the sensitivity of the ratings assigned to CFCRE 2016-C7 certificates and found that the transaction displays average sensitivity to further declines in NCF. In a scenario in which NCF declined a further 20% from Fitch's NCF, a downgrade of the junior 'AAAsf' certificates to 'Asf' could occur. In a more severe scenario, in which NCF declined a further 30% from Fitch's NCF, a downgrade of the junior 'AAAsf' certificates to 'BBB+sf' could occur. The presale report includes a detailed explanation of additional stresses and sensitivities on page 12.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
'No third-party due diligence was provided to or reviewed by Fitch in relation to this transaction.'
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by accessing the appendix referenced under "Related Research" below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions,' dated May 31, 2016.
Additional information is available at www.fitchratings.com.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)
https://www.fitchratings.com/site/re/886006
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 18 Aug 2016)
https://www.fitchratings.com/site/re/885802
Criteria for Analyzing Multiborrower U.S. and Canadian Commercial Mortgage Transactions (pub. 01 Jul 2016)
https://www.fitchratings.com/site/re/882237
Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)
https://www.fitchratings.com/site/re/882401
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
https://www.fitchratings.com/site/re/883130
Rating Criteria for Structured Finance Servicers (pub. 01 Jul 2016)
https://www.fitchratings.com/site/re/884140
Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)
https://www.fitchratings.com/site/re/735382
U.S. and Canadian Multiborrower CMBS Surveillance Criteria (pub. 11 Nov 2016)
https://www.fitchratings.com/site/re/889634
Related Research
CFCRE 2016-C7 -- Appendix
https://www.fitchratings.com/site/re/891348
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1015593
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1015593
Endorsement Policy
https://www.fitchratings.com/regulatory
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