NEW YORK--(BUSINESS WIRE)--Fitch Ratings has issued a presale report on Deutsche Bank Securities, Inc.'s COMM Mortgage Trust 2016-DC2 commercial mortgage pass-through certificates.
Fitch expects to rate the transaction and assign Rating Outlooks as follows:
--$35,639,000 class A-1 'AAAsf'; Outlook Stable;
--$4,483,000 class A-2 'AAAsf'; Outlook Stable;
--$15,740,000 class A-3 'AAAsf'; Outlook Stable;
--$60,282,000 class A-SB 'AAAsf'; Outlook Stable;
--$165,000,000 class A-4 'AAAsf'; Outlook Stable;
--$283,192,000 class A-5 'AAAsf'; Outlook Stable;
--$614,723,000b class X-A 'AAAsf'; Outlook Stable;
--$50,387,000 class A-M 'AAAsf'; Outlook Stable;
--$40,310,000 class B 'AA-sf'; Outlook Stable;
--$42,325,000 class C 'A-sf'; Outlook Stable;
--$82,635,000ab class X-B 'A-sf'; Outlook Stable;
--$42,326,000ab class X-C 'BBB-sf'; Outlook Stable;
--$23,178,000ab class X-D 'BB-sf'; Outlook Stable;
--$14,108,000ab class X-E 'NR';
--$29,225,159ab class X-F 'NR';
--$42,326,000a class D 'BBB-sf'; Outlook Stable;
--$13,100,000a class E 'BB+sf'; Outlook Stable;
--$10,078,000a class F 'BB-sf'; Outlook Stable;
--$14,108,000a class G 'NR';
--$29,225,159a class H 'NR'.
(a) Privately placed and pursuant to Rule 144A.
(b) Notional amount and interest-only.
The expected ratings are based on information provided by the issuer as of Feb. 17, 2016. Fitch does not expect to rate the $14,108,000ab interest-only class X-E, $29,225,159ab interest-only class X-F, $14,108,000a class G or the $29,225,159a class H.
The certificates represent the beneficial ownership interest in the trust, primary assets of which are 64 loans secured by 91 commercial properties having an aggregate principal balance of $806,195,160 as of the cut-off date. The loans were contributed to the trust by German American Capital Corporation, KeyBank National Association, and Jefferies LoanCore LLC.
Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 70.6% of the properties by balance and asset summary reviews and cash flow analysis of 81.5% of the pool.
KEY RATING DRIVERS
High Fitch Leverage: The transaction has higher leverage than other recent Fitch-rated fixed-rate multiborrower transactions. The pool's Fitch debt service coverage ratio (DSCR) of 1.12x is lower than the 2015 average of 1.18x and in line with the year-to-date (YTD) 2016 average of 1.12x, while the pool's Fitch loan-to-value (LTV) of 110.6% is higher than the 2015 average of 109.3% and in line with YTD 2016 average of 110.7%.
Amortization: The pool has four loans (14.9%) with full-term interest-only structures, which is below the YTD 2016 and 2015 averages of 33.4% and 23.3%, respectively. Partial interest-only loans represent 54.6% of the pool or 23 loans, while 37 loans (30.5%) are amortizing balloon loans with terms of five to 10 years. The pool is scheduled to amortize by 12.8% of the initial pool balance prior to maturity, more than the respective YTD 2016 and 2015 averages of 9.3% and 11.7%.
Property Type Concentration: Retail represents the largest property type concentration (31.2%), which is higher than both the YTD 2016 and the 2015 averages of 23.7% and 26.7%, respectively. Loans secured by hotel properties comprise 13.6% of the pool, below both the YTD 2016 and the 2015 averages of 16.1% and 17.0%, respectively. Loans secured by manufactured housing community properties comprise 10.1% of the pool and it is significantly above both the YTD 2016 and the 2015 averages of 1.9% and 2.3%.
For this transaction, Fitch's net cash flow (NCF) was 16.3% 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 could result in potential rating actions on the certificates.
Fitch evaluated the sensitivity of the ratings assigned to COMM 2016-DC2 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 'A-sf' could result. 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 result. The presale report includes a detailed explanation of additional stresses and sensitivities on page 10.
DUE DILIGENCE USAGE
Fitch was provided with third-party due diligence information from KPMG LLP. The third-party due diligence information was provided on Form ABS Due Diligence-15E and focused on a comparison and re-computation of certain characteristics with respect to each of the 64 mortgage loans. Fitch considered this information in its analysis and the findings did not have an impact on our analysis. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained on the bottom of the related rating action commentary.
Additional information is available at www.fitchratings.com.
COMM 2016-DC2 Mortgage Trust (US CMBS)
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
Criteria for Analyzing Multiborrower U.S. and Canadian Commercial Mortgage Transactions (pub. 01 Dec 2015)
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
Rating Criteria for Structured Finance Servicers (pub. 23 Apr 2015)
Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)
U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)
COMM 2016-DC2 Commercial Mortgage Trust Appendix
Dodd-Frank Rating Information Disclosure Form
ABS Due Diligence Form 15E 1