KBRA Downgrades Three Ratings and Affirms All Other Ratings for COMM 2016-DC2
23 Sep 2026 | New York
KBRA downgrades the ratings of three classes of certificates and affirms all other outstanding ratings of COMM 2016-DC2, a CMBS conduit transaction. The transaction has been reduced to four assets with an aggregate balance of $171.9 million, from 63 loans totaling $806.2 million at securitization. The ratings actions are based on our identification of all remaining assets as K-LOCs, our estimated losses of $38.6 million (which, if realized, would impact the class F certificates and below) and corresponding recoveries; realized losses totaling $7.0 million, which were allocated to the non-rated class H certificates; cumulative interest shortfalls of $1.4 million affecting the non-rated class H certificates; and the potential for interest shortfalls to extend higher in the capital structure as a result of the resolutions of the remaining assets.
As of the September 2026 remittance, two of the four remaining assets are specially serviced. Of the specially serviced assets, one is REO (21.0% of the pool balance) and one (32.8%) is non-performing matured. The remaining two loans (46.2%) are current on payments.
North Point Center East ($56.4 million, 32.8%, K-LOC, Specially Serviced, Non-Performing Matured)
- The loan is collateralized by a 540,707 sf, Class-A office complex located in Alpharetta, Georgia, 24 miles northeast of the Atlanta CBD. The development consists of four multi-tenant office buildings comprising three six-story buildings and one seven-story building.
- The loan transferred to the special servicer in October 2025 and failed to pay off at maturity in February 2026. A proposed extension modification is under review. The servicer indicated the property was 58.7% leased as of August 2026, down from 87.3% at issuance. Lease rollover through 2027 represents 32.7% of total base rent and is spread across 12 leases, the largest of which is Novogradac & Company LLP (7.1% of total base rent, 3.5% of collateral sf).
- The servicer reported an occupancy of 92.0% and a DSC of 1.19x for the six months ended June 2025. An appraisal dated November 2025 valued the property at $46.8 million ($87 per sf), which is 49.2% lower than the $92.1 million ($170 per sf) appraised value at issuance. KBRA's analysis resulted in an estimated loss of $25.6 million (45.4% estimated loss severity) on the loan balance of $56.4 million. The loss is based on a KBRA liquidation value of $32.9 million ($61 per sf) and projected total exposure of $58.5 million. The liquidation value is derived from a direct capitalization approach using a KNCF of $3.2 million and a capitalization rate of 9.75%.
Williamsburg Premium Outlets ($49.5 million, 28.8%, K-LOC, Current)
- The loan is collateralized by a 522,133 sf outlet center located in Williamsburg, Virginia, 45 miles east of the Richmond CBD.
- The loan matured in February 2026 and was brought current in April after a modification closed, extending maturity to February 2029. Under the terms of the modification, loan payments switched to amortizing and the loan was placed in a cash trap. The borrower contributed new equity to cover all costs associated with the modification. The loan was returned to the master servicer in May 2026.
- The servicer reported an occupancy of 80.0% and a DSC of 2.11 for FY 2025. An appraisal dated January 2026 valued the property at $167.0 million ($320 per sf), which is 50.6% lower than the $337.8 million ($647 per sf) appraised value at issuance. As of September 2026, the loan is current on payments and not specially serviced. However, in the event of default, KBRA estimates that the loan could experience a loss given default of $50.1 million (27.3% estimated loss severity) on the whole loan balance of $183.6 million, of which $13.5 million is allocated to the trust. The loss is based on a KBRA liquidation value of $133.6 million ($256 per sf), which is equal to 80% of the appraisal, and projected total exposure of $183.7 million.
Intercontinental Kansas City Hotel ($36.1 million, 21.0%, K-LOC, Specially Serviced, REO)
- The asset is a 10-story, 366-key full-service hotel located in Kansas City, Missouri, approximately five miles south of the city’s CBD.
- The loan transferred to the special servicer for imminent monetary default and failed to pay off at maturity in February 2026. The trust took title of the property at a May 2026 foreclosure sale and asset became REO. Special servicer commentary indicates JLL has presented an LOI to pay off the loan in full and a PSA is being negotiated.
- The servicer reported an occupancy of 53.0% and a DSC of 0.82x for the TTM ended September 2025. An appraisal dated January 2026 valued the property at $56.5 million ($154,372 per key), which is 37.9% lower than the $91.0 million ($248,634 per key) appraised value at issuance. KBRA's analysis resulted in an estimated loss of $12.9 million (21.4% estimated loss severity) on the whole loan balance of $60.3 million, of which $7.7 million is allocated to this trust. The loss is based on a KBRA liquidation value of $50.9 million ($138,934 per key), which is equal to 90% of the appraisal, and projected total exposure of $63.8 million.
Promenade Gateway ($30.0 million, 17.4%, K-LOC, Current)
- The loan is collateralized by a 131,470 sf, Class-A mixed-use building in downtown Santa Monica, California.
- The loan transferred to the special servicer in September 2025 due to imminent monetary default ahead of maturity in December. A modification was executed in December, extending maturity to December 2028. The loan was returned to the master servicer in March 2026, but remains cash managed and in cash trap. According to the servicer's June 2026 rent roll, the property was 70.1% leased, down from 94.5% at issuance. The decline is primarily due to AMC Theatres (16.6% of collateral sf) vacating upon its October 2024 lease expiration.
- The servicer reported an occupancy of 70.0% and a DSC of 2.04x for the YTD ended June 2026. An appraisal dated October 2025 valued the property at $85.7 million ($652 per sf), which is 52.4% lower than the $180.0 million ($1,369 per sf) appraised value at issuance. As of September 2026, the loan is current on payments and not specially serviced. However, in the event of default, KBRA estimates that the loan could experience a loss given default of $13.1 million (14.5% estimated loss severity) on the whole loan balance of $90.0 million, of which $4.4 million is allocated to this trust. The loss is based on a KBRA liquidation value and projected total exposure of $90.2 million. The liquidation value is derived from a direct capitalization approach using a KNCF of $6.6 million and a capitalization rate of 8.26%. KBRA adjusted the value based on Proposition 13, which is applicable in California. The KBRA Proposition 13 adjusted liquidation value is $77.2 million ($587 per sf).
Details concerning the classes with ratings changes are as follows:
- Class E to B- (sf) from BB- (sf)
- Class F to CCC (sf) from B (sf)
- Class G to CC (sf) from CCC (sf)
Details concerning the ratings affirmations are as follows:
- Class B at AA (sf)
- Class C at A (sf)
- Class D at BBB- (sf)
Rating Sensitivities
Future rating actions will be dependent upon the ongoing assessment of the timing and likelihood of ultimate payment of principal and accrued interest on the rated certificates. The assessment will consider the expected and actual losses on the remaining assets in the transaction, as well as the magnitude and extent of interest shortfalls, if any, on the certificates.
To access ratings and relevant documents, click here.