CHICAGO--(BUSINESS WIRE)--Fitch Ratings has issued a presale report on CGGS Commercial Mortgage Trust 2016-RND Pass Through Certificates, Series 2016-RND.
Fitch expects to rate the transaction and assign Rating Outlooks as follows:
--$607,700,000a class A-FX notes 'AAAsf'; Outlook Stable;
--$486,160,000ab class X-FX-CP notes 'AAAsf'; Outlook Stable;
--$607,700,000ab class X-FX-NCP notes 'AAAsf'; Outlook Stable;
--$134,300,000a class B-FX notes 'AA-sf'; Outlook Stable;
--$78,000,000a class C-FX notes 'A-sf'; Outlook Stable;
--$122,000,000a class D-FX notes 'BBB-sf'; Outlook Stable;
--$173,000,000a class E-FX notes 'BB-sf'; Outlook Stable.
--$417,500,000a class A-FL notes 'AAAsf'; Outlook Stable;
--$334,000,000ab class X-FL-CP notes 'AAAsf'; Outlook Stable;
--$417,500,000ab class X-FL-NCP notes 'AAAsf'; Outlook Stable;
--$93,500,000a class B-FL notes 'AA-sf'; Outlook Stable;
--$57,000,000a class C-FL notes 'A-sf'; Outlook Stable;
--$90,000,000a class D-FL notes 'BBB-sf'; Outlook Stable.
a Privately placed pursuant to Rule 144A.
b Notional amount and interest-only.
The expected ratings are based upon information provided as of March 8, 2016.
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); and 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.
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.
CGGS Commercial Mortgage Trust 2016-RND (US CMBS)
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 27 Aug 2015)
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)
CGGS Commercial Mortgage Trust 2016-RND - Appendix
Dodd-Frank Rating Information Disclosure Form
ABS Due Diligence Form 15E 1