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    MSCI   US55354G1004

MSCI INC.

(MSCI)
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MSCI : Fitch Affirms MSCI 2016-UBS9; Revises One Outlook to Negative

11/17/2020 | 05:07am EDT

Fitch Ratings has affirmed 14 classes of Morgan Stanley Capital I Trust (MSCI) Commercial Mortgage Pass-Through Certificates, series 2016-UBS9.

In addition, Fitch revised the Rating Outlook for one class to Negative from Stable.

RATING ACTIONS

ENTITY/DEBT	RATING		PRIOR

MSCI 2016-UBS9

A-2 61766CAB5

LT	AAAsf 	Affirmed		AAAsf

A-3 61766CAD1

LT	AAAsf 	Affirmed		AAAsf

A-4 61766CAE9

LT	AAAsf 	Affirmed		AAAsf

A-S 61766CAG4

LT	AAAsf 	Affirmed		AAAsf

A-SB 61766CAF6

LT	AAAsf 	Affirmed		AAAsf

B 61766CAK5

LT	AA-sf 	Affirmed		AA-sf

C 61766CAL3

LT	A-sf 	Affirmed		A-sf

D 61766CAV1

LT	BBB-sf 	Affirmed		BBB-sf

E 61766CAX7

LT	BB-sf 	Affirmed		BB-sf

F 61766CAZ2

LT	B-sf 	Affirmed		B-sf

X-A 61766CAH2

LT	AAAsf 	Affirmed		AAAsf

X-B 61766CAJ8

LT	AA-sf 	Affirmed		AA-sf

X-D 61766CAM1

LT	BBB-sf 	Affirmed		BBB-sf

X-E 61766CAP4

LT	BB-sf 	Affirmed		BB-sf

VIEW ADDITIONAL RATING DETAILS

KEY RATING DRIVERS

Increased Loss Expectations: While overall pool performance remains generally stable, loss expectations have increased slightly since Fitch's last rating action primarily due to refinance concerns surrounding two loans secured by Simon-owned retail outlet centers (5.0% of pool combined) that have experienced declining performance since issuance and are expected to be negatively affected in the near term by the coronavirus pandemic. Three loans (6.7%) have been flagged as Fitch Loans of Concern (FLOCs), including one specially serviced loan (2.4%).

The largest FLOC and the largest increase in loss since the prior rating action is the 7141 Cleanwater Lane loan (3.2%), which is secured by a leasehold interest in a four-story, 148,311-sf suburban office property located in Tumwater, WA. The property was built-to-suit in 2005 for the Office of the Attorney General for the State of Washington (AA+/Stable), which occupies the entire property through November 2021 with no extension options. The loan is structured with a Major Tenant TI/LC reserve that will collect 100% of all excess cash flow at the earlier of the date that tenant is vacating the subject or 18 months prior to the tenant's lease expiration date (May 2020). In lieu of the cash flow sweep, the borrower may deliver a $2 million letter of credit. The servicer indicated the cash flow sweep was not implemented. Fitch has an outstanding inquiry on whether the letter of credit was delivered. The servicer-reported NOI debt service coverage ratio (DSCR) was 1.92x as of YE 2019. Per Reis as of 3Q20, the non-CBD Olympia submarket had a high average office submarket vacancy rate of 18.8%.

The second largest FLOC, the specially serviced Hilton Garden Inn Tupelo (2.4%), is secured by a 158-key full-service hotel located in Tupelo, MS. The loan transferred to special servicing in April 2020 due to imminent monetary default caused by the coronavirus and was 60 days delinquent in July 2020. Occupancy, ADR and RevPAR were 59.1%, $119 and $71, respectively, as of the TTM June 2020 STR report, compared with 75.7%, $123 and $93 at TTM September 2019 and 69.4%, $113 and $78 at TTM November 2015. RevPAR penetration was 108.1% as of the TTM June 2020 STR report, compared with 121.5% at issuance. The servicer-reported NOI DSCR was 2.08x as of YE 2019. Per the servicer, the loan was brought current in August 2020 and is currently in the process of being returned to the master servicer.

The only FLOC outside of the top 15 is secured by a 76-key limited-service hotel (1.0%) located in Oakland, CA that has experienced performance decline due to the coronavirus pandemic.

Increased Credit Enhancement: As of the October 2020 distribution date, the pool's aggregate principal balance has been reduced by 12.3% to $584.4 million from $666.6 million at issuance. Five loans (20.1%) are full-term, interest-only and four loans (25.1%) remain in partial interest-only periods. Two loans (9.5%) are fully defeased. One loan, the GLP Industrial Portfolio B (8.4% of pool at issuance), paid off in September 2019. Loan maturities are concentrated in 2025 (44.1%) and 2026 (47.9%), with 3.2% in 2023 and 4.8% in 2031. One loan, the U Haul AREC RW Portfolio (9.4%), has an ARD in February 2026. Cumulative interest shortfalls totaling $10,141 are currently affecting the non-rated class H.

Alternative Loss Considerations: Fitch's analysis included an additional sensitivity scenario that applied a 25% potential outsized loss on the Grove City Premium Outlets and Gulfport Premium Outlets to reflect the weak sales, declining occupancy, significant upcoming rollover and refinance concerns. This analysis contributed to the Negative Rating Outlook on class F.

Grove City Premium Outlets (3.4%) is secured by a 531,200-sf outlet center located in Grove City, PA, approximately 50 miles north of Pittsburgh. The servicer reported a YE 2019 NOI DSCR of 2.70x. As of the June 2020 rent roll, the property was 79.6% leased, down from 82.1% at YE 2019, 85.2% at YE 2018, 87.3% at YE 2017 and 92.6% at YE 2016. The largest tenants include VF Factory Outlet (5.0%; November 2022), Old Navy (3.8%; January 2021) and the Nike Factory Store (3.1%; June 2023). Leases totaling 70.2% of NRA expire by maturity, including 26.7% within the next 12 months. Total outlet sales were $363 psf for TTM November 2018, compared with $367 psf for 2017 and $333 at issuance. Average occupancy costs have increased to approximately 13% as of TTM November 2018 from 9.7% at YE 2012.

Gulfport Premium Outlets (1.6%) is secured by a 300,238-sf outlet center located in Gulfport, MS. The servicer reported a YE 2019 NOI DSCR of 2.91x. The property was 85.0% leased as of YE 2019, down from 90.0% at YE 2018, 89.5% at YE 2017 and 90.4% at YE 2016. The largest tenants include H&M (6.5%; January 2029), VF Factory Outlet (5.8%; May 2021), Nike Factory Store (4.5%; January 2022) and Polo Ralph Lauren Factory Store (3.5%; January 2021). Leases totaling approximately 61% of NRA expire by maturity, including 25.3% in 2021. Total outlet sales were $318 psf for TTM November 2019, compared with $326 psf for TTM November 2018 and $307 in 2014.

Coronavirus Exposure: Three loans (7.1%) are secured by hotel properties. The WA NOI DSCR for the hotel loans is 2.36x; these hotel loans could sustain a decline in NOI of 56.1% before NOI DSCR falls below 1.0x. Nine loans (26.3%) are secured by retail properties, including three loans secured by Simon-owned retail outlet centers (11.7%). The WA NOI DSCR for the retail loans is 2.47x; these retail loans could sustain a decline in NOI of 58.2% before DSCR falls below 1.0x. Two loans (2.2%) are secured by multifamily properties. The WA NOI DSCR for the multifamily loans is 1.39x; these multifamily loans could sustain a decline in NOI of 26.1% before DSCR falls below 1.0x. Fitch applied additional stresses to two hotel loans, two retail loans and one multifamily loan to account for potential cash flow disruptions due to the coronavirus pandemic; these stresses contributed to the Negative Rating Outlook on class F.

Pool Concentrations: The top five and 10 loans in the transaction represent 44.6% and 70.0% of the current pool balance, respectively. The largest property type concentration is office (36.6%), followed by retail (27.9%), industrial (12.1%) and self-storage (9.4%).

RATING SENSITIVITIES

The Negative Rating Outlook on class F reflects the potential for future downgrade due to refinance concerns associated with the Grove City Premium Outlets and Gulfport Premium Outlets loans and the ultimate impact of the coronavirus pandemic; however, Fitch may revise the Outlook back to Stable should performance of these two loans remain stable and as expiring leases renew. The Stable Rating Outlooks on classes A-2 through E reflect the increasing credit enhancement, continued expected amortization and relatively stable performance of the majority of the pool.

Factors that Could, Individually or Collectively, Lead to a Positive Rating Action/Upgrade:

Sensitivity factors that lead to upgrades would include stable to improved asset performance coupled with pay down and/or defeasance. Upgrades of the 'Asf' and 'AAsf' categories would likely occur with significant improvement in credit enhancement and/or defeasance; however, adverse selection, increased concentrations and further underperformance of the FLOCs or loans expected to be negatively affected by the coronavirus pandemic could cause this trend to reverse. Upgrades to the 'BBBsf' category would be limited based on sensitivity to concentrations or the potential for future concentration. Classes would not be upgraded above 'Asf' if there is likelihood for interest shortfalls. Upgrades to the 'Bsf' and 'BBsf' categories are not likely until the later years in a transaction and only if the performance of the remaining pool is stable and/or properties vulnerable to the coronavirus return to pre-pandemic levels, and there is sufficient credit enhancement to the classes.

Factors that Could, Individually or Collectively, Lead to a Negative Rating Action/Downgrade:

Sensitivity factors that lead to downgrades include an increase in pool level losses from underperforming or specially serviced loans. Downgrades to the 'AAsf' and 'AAAsf' categories are not likely due to the position in the capital structure, but may occur should interest shortfalls affect the classes. Downgrades to the 'Asf' category would occur should overall pool losses increase significantly and/or one or more large loans have an outsized loss, which would erode credit enhancement. Downgrades to the 'BBsf' and 'BBBsf' categories are possible should performance of the FLOCs continue to decline, should additional loans transfer to special servicing and/or should loans susceptible to the coronavirus pandemic not stabilize. Downgrades to the 'Bsf' category would occur with an outsized loss on the Grove City Premium Outlets and Gulfport Premium Outlet loans, increased certainty of losses or as losses are realized.

In addition to its baseline scenario related to the coronavirus, Fitch also envisions a downside scenario where the health crisis is prolonged beyond 2021; should this scenario play out, Fitch expects negative rating actions, including downgrades and/or additional Negative Rating Outlook revisions.

For more information on Fitch's original rating sensitivity on the transaction, please refer to the new issuance report.

BEST/WORST CASE RATING SCENARIO

International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG CONSIDERATIONS

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg

Additional information is available on www.fitchratings.com

(C) 2020 Electronic News Publishing, source ENP Newswire

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Financials (USD)
Sales 2021 2 001 M - -
Net income 2021 762 M - -
Net Debt 2021 1 791 M - -
P/E ratio 2021 68,7x
Yield 2021 0,56%
Capitalization 51 462 M 51 462 M -
EV / Sales 2021 26,6x
EV / Sales 2022 23,9x
Nbr of Employees 3 910
Free-Float 60,1%
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Mean consensus OUTPERFORM
Number of Analysts 13
Last Close Price 624,22 $
Average target price 589,50 $
Spread / Average Target -5,56%
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Managers and Directors
Henry A. Fernandez Chairman & Chief Executive Officer
Carroll Douglas Baer Pettit President & Chief Operating Officer
Andrew C. Wiechmann Chief Financial Officer
Jigar Thakkar Chief Technology Officer & Head-Engineering
Linda H. Riefler Independent Director
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