Approximately $516.2 million of structured securities affected
New York, February 25, 2020 -- Moody's Investors Service, ("Moody's") has
affirmed the ratings on seven classes in Morgan Stanley Capital I Trust
2016-BNK2, Commercial Mortgage Pass-Through Certificates,
Series 2016-BNK2
Cl. A-1, Affirmed Aaa (sf); previously on Nov
20, 2018 Affirmed Aaa (sf)
Cl. A-2, Affirmed Aaa (sf); previously on Nov
20, 2018 Affirmed Aaa (sf)
Cl. A-3, Affirmed Aaa (sf); previously on Nov
20, 2018 Affirmed Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Nov
20, 2018 Affirmed Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Nov
20, 2018 Affirmed Aaa (sf)
Cl. A-S, Affirmed Aa3 (sf); previously on Nov
20, 2018 Affirmed Aa3 (sf)
Cl. X-A*, Affirmed Aaa (sf); previously on
Nov 20, 2018 Affirmed Aaa (sf)
* Reflects Interest Only Classes
RATINGS RATIONALE
The ratings on six 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
its referenced classes.
Moody's rating action reflects a base expected loss of 5.0%
of the current pooled balance, unchanged since Moody's last
review. Moody's base expected loss plus realized losses is now
4.8% of the original pooled balance, compared to 4.9%
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 RATINGS:
The 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 ACTION
The principal methodology used in rating all classes except interest-only
classes was "Approach to Rating US and Canadian Conduit/Fusion CMBS" published
in July 2017. The methodologies used in rating interest-only
classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS"
published in July 2017 and "Moody's Approach to Rating Structured Finance
Interest-Only (IO) Securities" published in February 2019.
Please see the list of ratings at the top of this announcement to identify
which classes are interest-only (indicated by the *).
Please see the Rating Methodologies page on www.moodys.com
for a copy of these methodologies.
DEAL PERFORMANCE
As of the February 17, 2020 distribution date, the transaction's
aggregate certificate balance has decreased by 2.7% to $705.7
million from $725.6 million at securitization. The
certificates are collateralized by 40 mortgage loans ranging in size from
less than 1% to 10.3% of the pool, with the
top ten loans (excluding defeasance) constituting 60.6%
of the pool. One loan, constituting 4.3% of
the pool, has an investment-grade structured credit assessment.
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,
unchanged since the last review.
Six loans, constituting 14.5% 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.
There are no loans that have been liquidated from the pool, nor
are there currently loans in special servicing.
Moody's received full year 2018 operating results for 100% of the
pool, and partial year 2019 operating results for 96% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 112%, compared to 114%
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 9.9%.
Moody's actual and stressed conduit DSCRs are 1.87X and 0.97X,
respectively, compared to 1.87X and 0.96X 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 International Square
Loan ($30 million -- 4.3% of the pool),
which represents a pari passu portion of a $246.7 million
senior mortgage loan. The total mortgage debt also includes junior
subordinate pari passu notes with an aggregate balance of $203.3
million. The loan is secured by a 1.16 million square foot
(SF) Class A office complex located in Washington, District of Columbia.
As of September 2019, the property was 87% leased,
compared to 96% in March 2018 and 94% at securitization.
Currently the Federal Reserve leases 33.7% of the space
under multiple leases, however, as part of a consolidation
of space they do not plan to renew their leases which expire in 2021/2022
(21.1% of NRA), 2026 (2.2% of NRA) and
2028 (10.4% of NRA). The stagerred timing of the
tenant's departure helps to mitigate some of the impact and the property
benefits from its location in a business improvement district called the
Golden Triangle in the heart of Washington, D.C with close
proximity to public transportation. According to CBRE the Washington
D.C. Class A office CBD submarket had a vacancy of 11%
in the third quarter of 2019. The loan is interest only for its
entire term and Moody's structured credit assessment and stressed DSCR
are a3 (sca.pd) and 1.51X, respectively, compared
to a1 (sca.pd) and 1.61X at the last review.
The top three conduit loans represent 26.5% of the pool
balance. The largest loan is the 101 Hudson Street Loan ($72.5
million -- 10.3% of the pool), which
represents a pari passu portion of a $250 million senior mortgage
loan. The loan is secured by a 42-story, Class A office
tower located in the Waterfront District of Jersey City, New Jersey.
The property features a four-story 900-stall parking garage,
flexible floor plates, 17-foot maximum ceiling heights,
Art-deco style polished granite lobby and a landscaped courtyard
area. The property is well located with close proximity to Exchange
Place light rail and the PATH station. National Union Fire Insurance
(272,000 SF or 20% of the NRA) vacated upon their April 2018
lease expiration. As of September 2019, occupancy was 76%.
It is reported that there is a total of 66,894 SF of new leases
that began in the third quarter 2019, which is expected to bring
the occupancy up to 81%. The loan is interest only for its
entire 10 year loan term. Moody's LTV and stressed DSCR are 98%
and 0.99X, respectively, the same as at the last review.
The second largest loan is the Harlem USA Loan ($68.0 million
-- 9.6% of the pool), which represents
a pari passu portion of a $108.0 million senior mortgage
loan. The loan is secured by the Borrower's leasehold interest
in a four-story, 246,000 SF retail center located in
a developed commercial area of Harlem - New York City. The
center runs along West 125th St between St. Nicholas Avenue and
Frederick Douglas Boulevard. The property benefits from high volumes
of pedestrian foot traffic commuting through the 125th St subway station
which provides access to the A, B, C and D train lines.
The property was 95% occupied as of September 2019, compared
to 98% as of June 2018. Performance has been stable.
Harlem USA operates under a 124-year term ground lease which expires
in May 2122. The current contract ground rent is $300,000
per year through lease expiration. The loan is interest only for
its entire 10 year loan term. Moody's LTV and stressed DSCR are
105% and 0.90X, respectively, the same as at
the last review.
The third largest loan is the Cole Retail Portfolio Loan ($46.5
million -- 6.6% of the pool), which
is secured by a portfolio of three cross-defaulted anchored retail
centers totaling over 544,000 SF. The properties are located
in tertiary markets in Oklahoma, Texas and Louisiana. All
properties are multi-tenanted and leased by a diverse mix of national
and local tenants. The portfolio was 95% occupied as of
September 2019, compared to 97% in December 2018 and December
2017, and 95% at securitization. Performance has been
stable. The loan is interest only for its entire 5-year
loan term and matures in October 2021. Moody's LTV and stressed
DSCR are 89% and 1.21X, respectively, the same
as at the last review.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions of the disclosure form.
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.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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.
Dariusz Surmacz
Vice President - Senior 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
EunJee EJ Park
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
