NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned the following ratings and Rating Outlooks to German American Capital Corp.'s CD Mortgage Securities Trust 2016-CD1 commercial mortgage pass-through certificates.
--$30,826,000 class A-1 'AAAsf'; Outlook Stable;
--$40,000,000 class A-2 'AAAsf'; Outlook Stable;
--$46,236,000 class A-SB 'AAAsf'; Outlook Stable;
--$168,000,000 class A-3 'AAAsf'; Outlook Stable;
--$207,191,000 class A-4 'AAAsf'; Outlook Stable;
--$566,092,000b class X-A 'AAAsf'; Outlook Stable;
--$73,839,000 class A-M 'AAAsf'; Outlook Stable;
--$31,644,000 class B 'AA-sf'; Outlook Stable;
--$28,129,000 class C 'A-sf'; Outlook Stable;
--$59,773,000ab class X-B 'A-sf'; Outlook Stable;
--$31,645,000ab class X-C 'BBB-sf'; Outlook Stable;
--$15,823,000ab class X-D ' BB-sf'; Outlook Stable;
--$6,153,000ab class X-E ' B-sf'; Outlook Stable;
--$31,645,000a class D 'BBB-sf'; Outlook Stable;
--$15,823,000a class E 'BB-sf'; Outlook Stable;
--$6,153,000a class F 'B-sf'; Outlook Stable.
The following classes were not rated:
--$23,733,985ab class X-F;
--$23,733,985a class G.
a) Privately placed pursuant to Rule 144A.
b) Notional amount and interest-only.
The certificates represent the beneficial ownership interest in the trust, primary assets of which are 32 loans secured by 58 commercial properties having an aggregate principal balance of $703,219,986 as of the cut-off date. The loans were contributed to the trust by German American Capital Corporation and Citigroup Global Markets Realty Corp.
Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 79.5% of the properties by balance and asset summary reviews and cash flow analysis of 90.5% of the pool.
KEY RATING DRIVERS
Low Fitch Leverage: The transaction has significantly lower leverage than other recent Fitch-rated transactions. The pool's weighted average (WA) Fitch DSCR of 1.25x is better than both the YTD 2016 average of 1.16x and the 2015 average of 1.18x. The pool's WA Fitch LTV of 95.5% is better than both the YTD 2016 average of 107.5% and the 2015 average of 109.3%. Excluding the credit opinion loans (27.7% of the pool), the Fitch DSCR and LTV are 1.17x and 108.9%, respectively.
Investment-Grade Credit Opinion Loans: Four of the 10 largest loans in the pool, representing 27.7%, have investment-grade credit opinions, this is well above the YTD 2016 average of 5.0% credit opinion loans. 10 Hudson Yards (9.2% of the pool) is the largest loan in the pool and has an investment-grade credit opinion of 'BBBsf*' on a stand-alone basis. Westfield San Francisco Centre (8.5%), the third largest loan in the pool, has an investment-grade credit opinion of 'Asf*' on a stand-alone basis. Further, Gas Company Tower (5.7%) and Vertex Pharmaceuticals (4.3%) have investment grade credit opinions of 'Asf*' and 'BBB-sf*', respectively. The implied credit enhancement levels for the conduit portion of the transaction for 'AAAsf' and 'BBB-sf' are 25.875% and 8.750%, respectively.
High Pool Concentration: The pool is more concentrated than other recent Fitch-rated multiborrower transactions. The top 10 loans comprise 66.6% of the pool, which is greater the YTD 2016 average of 54.6% and the 2015 average of 49.3%. The pool's loan concentration index (LCI) of 543 is above the YTD 2016 average of 420 and the 2015 average of 367.
For this transaction, Fitch's net cash flow (NCF) was 9% 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 CD 2016-CD1 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 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 12.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Fitch was provided with Form ABS Due Diligence-15E (Form 15') as prepared by KPMG, LLP. The third-party due diligence described in Form 15E focused on a comparison and re-computation of certain characteristics with respect to each of the mortgage loans. Fitch considered this information in its analysis and it did not have an effect on Fitch's analysis or conclusions.
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 18 Jul 2016)
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 18 Aug 2016)
Criteria for Analyzing Multiborrower U.S. and Canadian Commercial Mortgage Transactions (pub. 01 Jul 2016)
Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
Rating Criteria for Structured Finance Servicers (pub. 01 Jul 2016)
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)
CD 2016-CD1 Mortgage Trust -- Appendix
Dodd-Frank Rating Information Disclosure Form
ABS Due Diligence Form 15E 1