Fitch to Rate SGCMS 2016-C5 Commercial Mortgage Trust Pass-Through Certificates; Presale Issued
OREANDA-NEWS. Fitch Ratings has issued a presale report on the Societe Generale Commercial Mortgage Securities Trust 2016-C5 Pass-Through Certificates, Series 2016-C5. Fitch expects to rate the transaction and assign Rating Outlooks as follows:
--$30,047,000 class A-1 'AAAsf'; Outlook Stable;
--$92,155,000 class A-2 'AAAsf'; Outlook Stable;
--$165,000,000 class A-3 'AAAsf'; Outlook Stable;
--$188,922,000 class A-4 'AAAsf'; Outlook Stable;
--$39,644,000 class A-SB 'AAAsf'; Outlook Stable;
--$50,656,000 class A-M 'AAAsf'; Outlook Stable;
--$566,424,000b class X-A 'AAAsf'; Outlook Stable;
--$35,919,000b class X-B 'AA-sf'; Outlook Stable;
--$33,157,000b class X-C 'A-sf'; Outlook Stable;
--$35,919,000 class B 'AA-sf'; Outlook Stable;
--$33,157,000 class C 'A-sf'; Outlook Stable;
--$39,603,000ab class X-D 'BBB-sf'; Outlook Stable;
--$19,342,000ab class X-E 'BB-sf'; Outlook Stable;
--$8,289,000ab class X-F 'B-sf'; Outlook Stable;
--$39,603,000a class D 'BBB-sf'; Outlook Stable;
--$19,342,000a class E 'BB-sf'; Outlook Stable;
--$8,289,000a class F 'B-sf'; Outlook Stable.
(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 June 20, 2016. Fitch does not expect to rate the following classes:
--$34,077,980 class X-G;
--$34,077,980 class G.
The certificates represent the beneficial ownership interest in the trust, primary assets of which are 47 loans secured by 138 commercial properties having an aggregate principal balance of approximately $736.8 million as of the cutoff date. The loans were contributed to the trust by Societe Generale, Cantor Commercial Real Estate Lending, L. P., Natixis Real Estate Capital LLC, Benefit Street Partners CRE Finance LLC, and Silverpeak Real Estate Finance LLC.
Fitch reviewed a comprehensive sample of the transaction's collateral including site inspections on 71.4% of the properties by balance, cash flow analysis of 80.6%, and asset summary reviews on 80.6% of the pool.
KEY RATING DRIVERS
Fitch Leverage: The pool's leverage statistics are in line with other recent Fitch-rated, fixed-rate multiborrower transactions. The pool's Fitch debt service coverage ratio (DSCR) of 1.15x is slightly below the year-to-date (YTD) 2016 average of 1.17x and full-year 2015 average of 1.18x. The pool's Fitch loan to value (LTV) of 107.7% is in line with the YTD 2016 average of 107.5% and below the full-year 2015 average of 109.3%.
High Hotel Concentration: Approximately 20.9% of the pool by balance, including one of the top 10 loans (4.7%), consists of a hotel property, which is higher than the YTD 2016 average of 15.9% and the 2015 average of 17.0%; hotels have the highest probability of default in Fitch's multiborrower CMBS model.
Less Concentrated Pool: The largest 10 loans in the transaction compose 43.4% of the pool by balance. Compared to other Fitch-rated U. S. multiborrower deals, the concentration in this transaction is lower than the YTD 2016 and full-year 2015 average concentrations of 55.4% and 49.3%, respectively. The pool's concentration results in a loan concentration index (LCI) of 308, which is lower than the 2015 average of 367.
For this transaction, Fitch's net cash flow (NCF) was 14.1% 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 SGCMS 2016-C5 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 'BBB+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 pages 10-11.