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CSAIL 2016-C7 Commercial Mortgage Trust -- Moody's affirms five classes of CSAIL 2016-C7

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Rating Action: Moody's affirms five classes of CSAIL 2016-C7Global Credit Research - 01 Feb 2021Approximately $521 million of structured securities affectedNew York, February 01, 2021 -- Moody's Investors Service, ("Moody's") has affirmed the ratings on five classes in CSAIL 2016-C7 Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2016-C7:Cl. A-4, Affirmed Aaa (sf); previously on Nov 30, 2018 Affirmed Aaa (sf)Cl. A-5, Affirmed Aaa (sf); previously on Nov 30, 2018 Affirmed Aaa (sf)Cl. A-SB, Affirmed Aaa (sf); previously on Nov 30, 2018 Affirmed Aaa (sf)Cl. A-S, Affirmed Aa3 (sf); previously on Nov 30, 2018 Affirmed Aa3 (sf)Cl. X-A*, Affirmed Aa1 (sf); previously on Nov 30, 2018 Affirmed Aa1 (sf)* Reflects interest-only classRATINGS RATIONALEThe ratings on the P&I classes were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges.The rating on the IO class was affirmed based on the credit quality of the referenced classes.The coronavirus outbreak, the government measures put in place to contain it, and the weak global economic outlook continue to disrupt economies and credit markets across sectors and regions. Our analysis has considered the effect on the performance of commercial real estate from the current weak US economic activity and a gradual recovery for the coming months. Although an economic recovery is underway, it is tenuous and its continuation will be closely tied to containment of the virus. As a result, the degree of uncertainty around our forecasts is unusually high. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties.We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.Moody's rating action reflects a base expected loss of 7.4% of the current pooled balance, compared to 4.8% at Moody's last review. Moody's base expected loss plus realized losses is now 6.7% of the original pooled balance, compared to 4.6% at the last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected.Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance.Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls.METHODOLOGY UNDERLYING THE RATING ACTIONThe principal methodology used in rating all classes except interest-only classes was "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1244778. The methodologies used in rating interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1244778 and "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in February 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1111179. Please see the list of ratings at the top of this announcement to identify which classes are interest-only (indicated by the *). Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies. DEAL PERFORMANCEAs of the January 15, 2021 distribution date, the transaction's aggregate certificate balance has decreased by 9% to $699 million from $768 million at securitization. The certificates are collateralized by 50 mortgage loans ranging in size from less than 1% to 14% of the pool, with the top ten loans (excluding defeasance) constituting 55% of the pool. One loan, constituting 7% of the pool, has an investment-grade structured credit assessment. One loan, constituting 0.4% of the pool, has defeased and is secured by US government securities.Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 20, compared to 21 at Moody's last review.As of the January 2021 remittance report, loans representing 88% were current or within their grace period on their debt service payments, 0.4% were between 30 -- 59 days delinquent, and 12% were greater than 90 days delinquent.Ten loans, constituting 11% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance.No loans have been liquidated from the pool. Four loans, constituting 15% of the pool, are currently in special servicing. Two of the specially serviced loans, representing 12% of the pool, have transferred to special servicing since March 2020.The largest specially serviced loan is the Gurnee Mills Loan ($69.2 million -- 9.9% of the pool), which represents a pari-passu portion of a $254 million first mortgage. The loan is secured by a 1.7 million square foot (SF) portion of a 1.9 million SF regional mall located in Gurnee, Illinois, approximately 43 miles northwest of the Chicago central business district (CBD). It is adjacent to the Six Flag Great America amusement park, which remains closed as a result of the coronavirus pandemic. The anchors include Macy's, Bass Pro Shops, Kohl's (each part of the collateral) and Burlington Coat Factory (non-collateral). There is a vacant collateral anchor box, a former Sears (201,000 SF) which vacated in 2018. The sponsor, Simon Property Group, is now considering splitting the former Sears space into three separate boxes and has had discussions with several tenants to lease the smaller spaces. The mall offers shoppers entertainment attractions including two international food courts, multiple themed restaurants, a 19 screen Marcus Cinema (non-collateral and currently open), Serpent Safari's reptile exhibit, Rink Side Sports Family Entertainment Center, and a 30,000 gallon freshwater aquarium and an archery/shooting range in the Bass Pro Shops. As of July 2020, the property was 80% leased, compared to 91% in September 2018. Due to an increase in vacancy and lower rental revenues, the year-end 2019 property net operating income (NOI) was approximately 16% lower than underwritten levels. The year-end 2019 NOI DSCR was 1.42X and the loan has amortized 8% since securitization. The loan transferred to special servicing in June 2020 due to imminent monetary default as a result of the pandemic, and as of the January 2021 remittance report was last paid through April 2020. The special servicer and borrower entered into a forbearance agreement on December 31, 2020, and the loan is in the process of being returned to the master servicer.The second largest specially serviced loan is the Preserve at Autumn Ridge II loan ($19.3 million -- 2.8% of the pool), which is secured by the fee interest in a 152-unit townhome-style multifamily property located in Watertown, New York. The collateral is Phase II of the two-phase development of the Preserve at Autumn Ridge totaling 394 units. The loan transferred to special servicing due to imminent non-monetary default in January 2019. The servicer was working with the borrower and a third party on a possible assumption / equity transfer to a joint venture. According to the servicer commentary, the assumption of the loan was closed and the receiver was discharged. As of the January 2021 remittance report, the loan was brought current from greater than 90 days delinquent.The third largest specially serviced loan is the Holiday Inn & Suites Plantation Loan ($11.5 million -- 1.6% of the pool), which is secured by a 156-room lodging facility that opened in 1978 located in Plantation, Florida. Loan was transferred for imminent default at the borrower's request as a result of the coronavirus pandemic. The special servicer and borrower are currently assessing potential options to address the loan's performance. As of the January 2021 remittance report the loan was greater than 90 days delinquent and was last paid through March 2020.The remaining specially serviced loan is secured by two cross-collateralized shopping centers located in Texas. The loan transferred to special servicing in November 2019 for imminent default and as of the January 2021 remittance report was between 30 -- 59 days delinquent. Moody's estimates an aggregate $23.1 million loss for the specially serviced loans (28% expected loss on average).The credit risk of loans is determined primarily by two factors: 1) Moody's assessment of the probability of default, which is largely driven by each loan's DSCR, and 2) Moody's assessment of the severity of loss upon a default, which is largely driven by each loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV. As described in the CMBS methodology used to rate this transaction, we make various adjustments to the MLTV. We adjust the MLTV for each loan using a value that reflects capitalization (cap) rates that are between our sustainable cap rates and market cap rates. We also use an adjusted loan balance that reflects each loan's amortization profile. The MLTV reported in this publication reflects the MLTV before the adjustments described in the methodology.Moody's received full year 2019 operating results for 100% of the pool, and partial year 2020 operating results for 100% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 115%, compared to 118% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 20% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 10.2%.Moody's actual and stressed conduit DSCRs are 1.35X and 0.97X, respectively, compared to 1.36X and 0.94X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance.The loan with a structured credit assessment is the 9 West 57th Street Loan ($50.0 million -- 7.2% of the pool), which is secured by a 50-story, Class A office building located on West 57th Street in New York City. The building is located directly south of the Plaza Hotel and provides views of Central Park above the 27th floor. There is 1.52 million SF of office space, 71,704 SF of grade and lower level retail, 25,005 SF of basement storage space and also a 60,000 SF subterranean parking garage (285 spaces). The loan represents a 4.9% pari-passu portion of a $1,013,724,000 first mortgage loan. The property is also encumbered with a $186.3 million subordinate B-Note. As of September 2020 the property was 70% leased. Apollo Management Holdings (194,494 SF, 12% of the net rentable area (NRA)) has extended the lease expiring in 2020 on a portion of its space through 2036. Another large tenant, Kohlberg, Kravis, Roberts & Co. (KKR) (196,124 SF, 12% of NRA) vacated the property at lease expiration in 2020. Moody's structured credit assessment and stressed DSCR are aaa (sca.pd) and 1.31X, respectively, the same as that at the last review.The top three conduit loans represent 21.7% of the pool balance. The largest loan is the Coconut Point Loan ($96.0 million -- 13.7% of the pool), which represents a 52.6% pari-passu portion of a $182.5 million senior mortgage loan. The loan is secured by the fee and leasehold interests in an 836,531 SF component of an open-air, super-regional mall containing 1,205,351 SF located in Estero, Florida. The mall contains two anchor tenants, which include Super Target (186,995 SF; non-collateral) and Dillard's (181,825 SF; non-collateral). As of June 2020, the property was 88% leased. The loan has amortized 4% since securitization. Moody's LTV and stressed DSCR are 121% and 0.87X, respectively, compared to 126% and 0.84X at the last review.The second largest loan is the Cypress Park West Loan ($28.7 million -- 4.1% of the pool), which is secured by a fee simple interest in a two-building, 225,757 SF, suburban office complex located in Fort Lauderdale, Florida. Cypress Park West I consists of a seven story, 119,964 SF building built in 1986 and renovated in 2003. Cypress Park West II consists of a four story, 113,964 SF building built in 2003. The complex is of Class-A quality and features an on-site café, a conference room facility, 24/7 security and a six-story parking garage. Major tenants at the property include Microsoft Corporation's Latin America Headquarters, which has been at the property since 2003. As of September 2020, the complex was 91% leased compared to 90% leased as of December 2019. The loan has amortized 2% since securitization. Moody's LTV and stressed DSCR are 125% and 0.84X, respectively, compared to 127% and 0.83X at the last review.The third largest loan is the Tampa Marriott Westshore Loan ($26.9 million -- 3.9% of the pool), which is secured by the sub-leasehold interest in a 310-guestroom, full-service hotel located in Tampa, Florida. Tampa International Airport is located approximately 2.5 miles northwest of the property. Property improvements generally consist of a 13-story building having a guestroom mix of 165 king rooms, 127 double/double rooms, 16 handicap accessible rooms and two suites. The borrower had requested relief as the property has been impacted by the disruptions as a result of the coronavirus outbreak. The special servicer provided relief in the form of a consent agreement which allowed borrower to defer the requirement of the Furniture, Fixtures & Equipment(FF&E) monthly deposits to cover debt service payments beginning with June 2020 through November 2020. The loan has amortized 10% since securitization. Moody's LTV and stressed DSCR are 91% and 1.37X, respectively, compared to 94% and 1.29X at the last review.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.Moody's did not use any stress scenario simulations in its analysis.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.At least one ESG consideration was material to the credit rating action(s) announced and described above.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Kevin Li Asst Vice President - Analyst Structured Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Romina Padhi VP - Senior Credit Officer Structured Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. 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