NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned the following ratings and Ratings Outlooks to Citigroup Commercial Mortgage Trust 2016-C3 commercial mortgage pass-through certificates:
--$31,197,000 class A-1 'AAAsf'; Outlook Stable;
--$75,370,000 class A-2 'AAAsf'; Outlook Stable;
--$180,000,000 class A-3 'AAAsf'; Outlook Stable;
--$209,266,000 class A-4 'AAAsf'; Outlook Stable;
--$33,711,000 class A-AB 'AAAsf'; Outlook Stable;
--$592,900,000b class X-A 'AAAsf'; Outlook Stable;
--$40,662,000b class X-B 'AA-sf'; Outlook Stable;
--$63,356,000 class A-S 'AAAsf'; Outlook Stable;
--$40,662,000 class B 'AA-sf'; Outlook Stable;
--$30,259,000 class C 'A-sf'; Outlook Stable;
--$39,716,000ab class X-D 'BBB-sf'; Outlook Stable;
--$17,021,000ab class X-E 'BB-sf'; Outlook Stable;
--$7,565,000ab class X-F 'B-sf'; Outlook Stable;
--$39,716,000a class D 'BBB-sf'; Outlook Stable;
--$17,021,000a class E 'BB-sf'; Outlook Stable;
--$7,565,000a class F 'B-sf'; Outlook Stable.
Fitch does not rate the $28,369,189ab class X-G and the $28,369,189a 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 44 loans secured by 72 commercial properties having an aggregate principal balance of $765,492,189 as of the cut-off date. The loans were contributed to the trust by Citigroup Global Markets Realty Corporation, Barclays Bank PLC, Rialto Mortgage Finance, LLC, and Cantor Commercial Real Estate Lending, L.P.
Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 73.5% of the properties by balance, cash flow analysis of 88.7%, and asset summary reviews on 100% of the pool.
KEY RATING DRIVERS
Lower Than Average Fitch Leverage: The Fitch leverage for this transaction is better than other recent Fitch-rated transactions. The pool's weighted average (WA) Fitch debt service coverage ratio (DSCR) of 1.30x is better than both the year-to-date (YTD) 2016 average of 1.19x and the 2015 average of 1.18x. The pool's WA Fitch loan to value (LTV) of 103.5% is better than the YTD 2016 average of 105.8% and the 2015 average of 109.3%
Investment-Grade Credit Opinion Loan: The sixth largest loan, Potomac Mills (4.6% of the pool), has an investment-grade credit opinion of 'BBBsf*' on a stand-alone basis. Excluding this loan, the conduit has a Fitch DSCR of 1.29x and Fitch LTV of 105.5%.
High Lodging Exposure: There are 10 loans, representing 20.86% of the pool, that consist of hotel properties. The largest hotel loan is Marriott Hilton Head Resort & Spa (4.0% of the pool), which is the 10th largest loan in the pool. The pool's hotel concentration is greater than the YTD 2016 average of 17.0%. Hotels have the highest probability of default in Fitch's multiborrower CMBS model.
Average Pool Concentration: The top 10 loans in pool make up 48.2% of the total balance. This is lower than the YTD average of 55.3% and the 2015 average of 49.3%. The pool's loan concentration index (LCI) is 428, which is slightly higher than the YTD average of 421. Sponsor concentration for the pool is higher than average due to related borrowers. The pool's sponsor concentration index (SCI) is 564, which is greater than the YTD average of 494.
For this transaction, Fitch's net cash flow (NCF) was 10.6% 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 the CGCMT 2016-C3 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 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
Fitch was provided with third-party due diligence information from Ernst & Young 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 mortgage loans. Fitch considered this information in its analysis and the findings did not have an impact on Fitch's analysis or conclusions. 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.
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.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 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 Multiborrower CMBS Surveillance Criteria (pub. 11 Nov 2016)
Citigroup Commercial Mortgage Trust 2016-C3 - Appendix
Dodd-Frank Rating Information Disclosure Form
ABS Due Diligence Form 15E 1
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