Fitch to Rate COMM 2016-COR1; Presale Issued
KEY RATING DRIVERS
Fitch Leverage: The transaction has slightly lower leverage than other recent Fitch-rated transactions. The Fitch DSCR for the trust of 1.21x is better than both the YTD 2016 average of 1.18x and the 2015 average of 1.18x. The Fitch LTV for the trust of 106.3% is similar to the YTD 2016 average of 106.2% and lower than the 2015 average of 109.3%. Excluding the credit opinion loans (4.6% of the pool), the Fitch DSCR and LTV are 1.19x and 108.8%, respectively.
Limited Amortization: Fifteen loans, representing, 51.8% of the pool, are full interest-only. This is higher than the average of 23.3% for 2015 and 30.9% for YTD 2016 for other Fitch-rated U. S. multiborrower deals. Additionally, 14 loans comprising 24.3% of the pool are partial interest only; this share is lower than the average of 43.1% for 2015 and 37.6% for YTD 2016 of other Fitch-rated U. S. multiborrower deals. Overall, the pool is scheduled to pay down by only 9.4% compared with the averages of 11.7% for 2015 and 10.3% YTD for 2016 for other Fitch-rated U. S. deals.
Investment-Grade Credit Opinion Loans: Two loans, representing 4.6% of the pool, have investment-grade credit opinions on a stand-alone basis; this is below the YTD 2016 average of 7.2% credit opinion loans. Westfield San Francisco Centre (2.64% of the pool), the 12th largest loan in the pool, has an investment grade credit opinion of 'Asf'* on a stand-alone basis. Further, Grant and Geary Center (loan #20; 1.94% of the pool), has an investment-grade credit opinion of 'A+sf*' on a stand-alone basis.
For this transaction, Fitch's net cash flow (NCF) was 5.5% 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 COMM 2016-COR1 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 'BBBsf' 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 'BB+sf' could result. The presale report includes a detailed explanation of additional stresses and sensitivities on page 10.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
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 mortgage loans. Fitch considered this information in its analysis and the findings did not have an impact on the 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.
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.
Fitch expects to rate the transaction and assign Rating Outlooks as follows:
--$30,136,000 class A-1 'AAAsf'; Outlook Stable;
--$64,857,000 class A-2 'AAAsf'; Outlook Stable;
--$48,044,000 class A-SB 'AAAsf'; Outlook Stable;
--$215,000,000 class A-3 'AAAsf'; Outlook Stable;
--$265,440,000 class A-4 'AAAsf'; Outlook Stable;
--$676,918,000b class X-A 'AAAsf'; Outlook Stable;
--$53,441,000 class A-M 'AAAsf'; Outlook Stable;
--$54,554,000 class B 'AA-sf'; Outlook Stable;
--$41,194,000 class C 'A-sf'; Outlook Stable;
--$54,554,000ab class X-B 'AA-sf'; Outlook Stable;
--$87,955,000ab class X-C 'BBB-sf'; Outlook Stable;
--$22,267,000ab class X-E ' BB-sf'; Outlook Stable;
--$10,020,000ab class X-F ' B-sf'; Outlook Stable;
--$46,761,000a class D 'BBB-sf'; Outlook Stable;
--$22,267,000a class E 'BB-sf'; Outlook Stable;
--$10,020,000a class F 'B-sf'; Outlook Stable.
The following classes are not expected to be rated:
--$38,967,985ab class X-G;
--$38,967,985a class G.
A)Privately placed pursuant to Rule 144A.
B)Notional amount and interest-only.
The expected ratings are based on information provided by the issuer as of Oct. 3, 2016.
The certificates represent the beneficial ownership interest in the trust, primary assets of which are 42 loans secured by 50 commercial properties having an aggregate principal balance of $890,681,985 as of the cut-off date. The loans were contributed to the trust by German American Capital Corporation and Jefferies LoanCore LLC.
Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 82.8% of the properties by balance and asset summary reviews and cash flow analysis of 84.2% of the pool.