Fitch to Rate Citigroup Commercial Mortgage Trust 2016-C2; Presale Issued

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has issued a presale report on Citigroup Commercial Mortgage Trust 2016-C2 commercial mortgage pass-through certificates.

Fitch expects to rate the transaction and assign Rating Outlooks as follows:

--$20,227,000 class A-1 'AAAsf'; Outlook Stable;

--$15,097,000 class A-2 'AAAsf'; Outlook Stable;

--$170,000,000 class A-3 'AAAsf'; Outlook Stable;

--$189,298,000 class A-4 'AAAsf'; Outlook Stable;

--$31,793,000 class A-AB 'AAAsf'; Outlook Stable;

--$456,873,000b class X-A 'AAAsf'; Outlook Stable;

--$68,531,000b class X-B 'A-sf'; Outlook Stable;

--$30,458,000 class A-S 'AAAsf'; Outlook Stable;

--$35,027,000 class B 'AA-sf'; Outlook Stable;

--$33,504,000 class C 'A-sf'; Outlook Stable;

--$32,743,000 class D 'BBB-sf'; Outlook Stable;

--$32,743,000ab class X-D 'BBB-sf'; Outlook Stable;

--$9,137,500ac class E-1 'BB+sf'; Outlook Stable;

--$9,137,500ac class E-2 'BB-sf'; Outlook Stable;

--$18,275,000ac class E 'BB-sf'; Outlook Stable;

--$5,330,000ac class F 'B-sf'; Outlook Stable;

--$23,605,000ac class EF 'B-sf'; Outlook Stable.

a) Privately placed pursuant to Rule 144A.

b) Notional amount and interest-only.

c) The class E-1 and E-2 certificates may be exchanged for a related amount of class E certificates, and class E certificates may be exchanged for a ratable portion of class E-1 and E-2 certificates. Additionally, class E-1, E-2, F-1 and F-2 certificates may be exchanged for a related amount of class EF certificates, and class EF certificates may be exchanged for a ratable portion of each class of class E-1, E-2, F-1 and F-2 certificates. A holder of class E-1, E-2, F-1, F-2, G-1 and G-2 certificates may exchange such classes of certificates (on an aggregate basis) for a related amount of class EFG certificates, and a holder of class EFG certificates may exchange that class EFG for a ratable portion of each class of the class E-1, E-2, F-1, F-2, G-1 and G-2 certificates.

The expected ratings are based on information provided by the issuer as of Aug. 4, 2016. Fitch does not expect to rate the $2,665,000 class F-1, $2,665,000 class F-2, $5,330,000 class G-1, $5,330,000 class G-2, $10,660,000 exchangeable class G, $34,265,000 exchangeable class EFG, $8,376,511 class H-1, $8,376,811 class H-2, or the $16,753,022 exchangeable class H certificates.

The certificates represent the beneficial ownership interest in the trust, primary assets of which are 44 loans secured by 53 commercial properties having an aggregate principal balance of $609,165,022 as of the cut-off date. The loans were contributed to the trust by Citigroup Global Markets Realty Corp., Rialto Mortgage Finance, LLC, MC-Five Mile Commercial Mortgage Finance LLC, Walker & Dunlop Commercial Property Funding I CB, LLC.

Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 81.9% of the properties by balance and asset summary reviews and cash flow analysis of 86.5% of the pool.

KEY RATING DRIVERS

High Fitch Leverage: The pool's Fitch DSCR and LTV are 1.15x and 108.5%, respectively. This is slightly worse than the year-to-date (YTD) 2016 average Fitch DSCR of 1.16x and the YTD 2016 average Fitch LTV of 107.5%. Excluding the credit opinion loan (9.8% of the pool), the Fitch DSCR and LTV are 1.10x and 111.3%, respectively.

Investment Grade Credit Opinion Loan Represents 9.8% of the Pool: One loan, Vertex Pharmaceuticals HQ (9.8% of the pool) has an investment-grade credit opinion of 'BBB-sf*' on a stand-alone basis.

RATING SENSITIVITIES

For this transaction, Fitch's net cash flow (NCF) was 17.4% 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 CGCMT 2016-C2 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 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 'BBBsf' could result. The presale report includes a detailed explanation of additional stresses and sensitivities on page 11.

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 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.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 18 Jul 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884963

Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 27 Aug 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=870009

Criteria for Analyzing Multiborrower U.S. and Canadian Commercial Mortgage Transactions (pub. 01 Jul 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=882237

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=882401

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=883130

Rating Criteria for Structured Finance Servicers (pub. 01 Jul 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884140

Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=735382

U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873395

Related Research

Citigroup Commercial Mortgage Trust 2016-C2

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=886116

Citigroup Commercial Mortgage Trust 2016-C2 -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=886233

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1010100

ABS Due Diligence Form 15E 1

https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=1010100&flm_nm=15e_1010100_1.pdf

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1010100

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160808005891/en/

Fitch Ratings
Primary Analyst
Lisa Chen
Director
+1-212-908-9109
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Clement Okeke
Associate Director
+1-312-606-2323
or
Committee Chairperson
Eric Rothfeld
Managing Director
+1-212-908-0761
or
Media Relations:
Sandro Scenga, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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