KBRA Downgrades Three Ratings and Affirms Two Ratings for DBJPM 2016-SFC

KBRA downgrades three ratings and affirms two ratings of DBJPM 2016-SFC, a CMBS SASB transaction. The downgrades reflect the continued decline in performance of the loan collateral, Westfield San Francisco Centre, since KBRA’s last ratings adjustments in March 2024, the loan’s 90+ day delinquency status, and the fact that interest shortfalls are affecting all rated classes. The loan was transferred to the special servicer in June 2023 and there is a $201.9 million ARA, cumulative ASER amount of $8.1 million, and total servicer advances of $31.7 million as of February 2025. The property has experienced a significant decrease in performance over the past several years due to the loss of most of the tenants. The ongoing challenges facing many large shopping malls and shift to a hybrid work model are negatively affecting the property and its re-leasing prospects.

The transaction collateral consists of a $306.9 million portion of a $558.0 million whole mortgage loan that is composed of eight senior A notes totaling $182.0 million and four subordinate B notes totaling $124.9 million. The remaining 16 senior A notes totaling $251.1 million are not trust collateral.

The loan is secured by nearly 795,000 sf of Westfield San Francisco Centre, a two-building, 1.4 million-sf mixed-use property in San Francisco. The retail portion of the loan collateral is 501,300 sf (62.9% of collateral square footage) and the office component is 293,200 sf (37.1%). The loan sponsor is a joint venture between Unibail-Rodamco-Westfield and Brookfield Asset Management.

The review utilized information from the trustee and servicer to determine KNCF. The collateral portion of Westfield San Francisco Centre is about 25.0% leased, down from 30.0% at last review, and from 75.0% in 2021. The property was nearly 96.0% occupied at securitization. Because the property is operating at an occupancy level that is below historical levels, KBRA performed a stabilized analysis to derive property value and KLTV. The analysis produced a stabilized KNCF of $15.8 million and a KBRA value of $71.3 million, which takes into account lease-up costs and also considers an as-is liquidation of the property. Based on KBRA’s value, the trust is likely to incur significant principal losses upon final disposition of the collateral asset.

KBRA maintains the loan as a K-LOC and maintains the KPO of Underperform.

Details concerning the classes with ratings adjustments are as follows:

To access ratings and relevant documents, click here.

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