KBRA Downgrades Two Ratings, Withdraws Five Interest-Only Ratings and Affirms All Other Outstanding Ratings for CD 2016-CD2
6 Nov 2026 | New York
KBRA downgrades the ratings of two classes of certificates, withdraws the ratings of five interest-only (IO) classes, and affirms all other outstanding ratings for CD 2016-CD2. The transaction has been reduced to ten loans with an aggregate balance of $338.0 million, down from 30 loans totaling $975.4 million at securitization. In accordance with KBRA's Methodology for Rating Interest-Only Certificates in CMBS Transactions, KBRA withdraws the ratings of the five IO classes, as the number of remaining loans has declined to ten, meeting the methodology's criterion for potential withdrawal. Of the ten remaining pooled assets, five loans (79.1% of the pool balance) are identified as KBRA Loans of Concern (K-LOCs), including four (58.5%) that are specially serviced. Of the K-LOCs, four (62.8%) have estimated losses.
The rating actions follow a surveillance review of the transaction and reflect KBRA’s identification of five K-LOCs (79.1%), estimated principal losses of $51.3 million and corresponding recoveries, as well as ongoing interest shortfalls affecting classes D and below. If realized, KBRA’s estimated losses would result in a complete write-down of the remaining class D principal balance and a 56.3% reduction in the principal balance of class C. The rating actions also consider the potential for interest shortfalls to extend further up the capital structure as the remaining specially serviced assets are resolved. As of the October 2026 remittance, the transaction has incurred $106.8 million in cumulative realized losses allocated to certificate principal balances, which have impacted classes D and below, including the corresponding exchangeable certificate interests.
Details of the remaining assets are outlined below.
8 Times Square & 1460 Broadway ($100.0 million, 29.6%, K-LOC, Specially Serviced, Performing Matured)
- The loan is collateralized by a 214,341 sf, 16-story office building with ground floor retail located on the corner of West 41st Street and Broadway in the Times Square South neighborhood of New York City's Manhattan borough. The building has 36,120 sf of retail space on the basement through third floors, 178,221 sf of office space on floors four through 17, and four digital LED signs, three of which are leased by the sole retail tenant, Foot Locker. The office tenant is WeWork. The loan is scheduled to mature in November 2026.
- The loan was transferred to the special servicer in August 2026 due to imminent maturity default, at the borrower's request. According to the special servicer, the borrower has requested for an extension, however KBRA has not received any further details as of the current review. The property is 100% leased to two tenants, with leases scheduled to expire in 2032 (65.7% of total base rent) and 2034 (34.3%). KBRA notes additional concern regarding the financial profile of WeWork, the second largest tenant by base rent (34.3% of base rent; 83.1% of total sf), which renegotiated its lease in connection with its bankruptcy restructuring, resulting in a 20.0% reduction in rent. The amended lease retains its original August 2034 expiration date. Given the ongoing leasing and demand challenges facing the office sector, WeWork's potential departure could present significant re-leasing challenges, particularly considering the property's age and quality. The servicer reported occupancy of 100% and a DSC of 1.75x for YTD March 2026. As of October 2026, the loan remains current on payments.
- KBRA's analysis resulted in an estimated loss of $72.0 million (36.0% estimated loss severity) on a whole loan balance of $200.0 million, of which $36.0 million of the estimated loss is allocated to this trust. The loss is based on a KBRA liquidation value of $128.3 million ($598 per sf). The value is derived using a direct capitalization approach based on a KNCF of $9.9 million and a blended capitalization rate of 7.70%, reflecting an 8.75% capitalization rate for the office component, a 50 bps increase from the prior review, and a 7.25% capitalization rate for the retail component.
Prudential Plaza ($69.7 million, 20.6%, K-LOC, Current)
- The loan is collateralized by two adjoining Class-A office towers containing 2.3 million sf, located in the East Loop submarket of the Chicago CBD. One Prudential Plaza is a 41-story building with 1.3 million sf that was originally constructed in 1955, while Two Prudential Plaza is a 64-story building with 1.0 million sf that was constructed in 1990. The modified loan is scheduled to mature in August 2027.
- A loan modification was executed in December 2023, extending the loan term by two years through August 2027, with an option for an additional two-year extension. The modification also converted the loan to interest-only payments for the remainder of the loan term. According to the June 2026 rent roll, the property was 63.2% leased, compared to 73.9% at the prior review and 79.7% at closing. The decline in occupancy was primarily attributable to the departure of SMS Assist, LLC, formerly the property's second largest tenant (5.8% of total base rent; 5.1% of total sf), which exercised its termination option in early 2026. The tenant was expected to pay a $7.5 million termination fee, equivalent to approximately three years of base rent; however, KBRA has not received confirmation of payment as of the current review. Additionally, 25.2% of total base rent, representing 43 tenant suites, is scheduled to expire through YE 2029, presenting further rollover risk should the borrower exercise its additional two-year extension option.
- The servicer reported an occupancy of 63.0% and a DSC of 1.26x for YTD June 2026. As of October 2026, the loan is current on payments and not specially serviced. However, in the event of a default, KBRA estimates that it could experience a loss given default of $31.7 million (8.2% estimated loss severity) on a whole loan balance of $385.5 million, of which $5.7 million is allocated to this trust. The estimated loss is based on a KBRA liquidation value of $353.8 million ($158 per sf). The liquidation value is derived using a direct capitalization approach based on a KNCF of $32.7 million and a capitalization rate of 9.25%.
60 Madison Avenue ($55.0 million, 16.3%, K-LOC, Specially Serviced, Performing Matured)
- The loan is collateralized by a 217,534 sf, Class-B office building located in the Madison Square Park area of New York City’s borough of Manhattan. The loan matured in October 2026.
- The loan transferred to special servicing in July 2026 due to imminent maturity default. In June 2026, it was reported that four new office leases totaling approximately 70,000 sf were executed at the property with Foundational Labs, Inc. d/b/a Pace, GovWell Technologies, Inc., The Full Picture, LLC, and Tenex Labs, LLC. With the commencement of the new leases, occupancy is expected to increase to nearly 90.0%, resulting in an approximately $6.0 million increase in annual base rent. According to the servicer, the leases will commence upon delivery of the premises to the respective tenants following substantial completion of landlord construction. However, the borrower has not provided an anticipated substantial completion date, and the timing of lease commencement remains uncertain. The special servicer is currently evaluating the borrower’s request for a short-term loan extension to facilitate the refinancing of the loan.
- The servicer reported an occupancy and DSC of 58.0% and 1.38x for the FY 2025. At this time, KBRA does not estimate a loss on this asset.
80 Park Plaza ($36.3 million, 10.7%, K-LOC, Specially Serviced, Non-Performing Matured)
- The loan is collateralized by a 960,000 sf office building located in the Newark, New Jersey CBD. The property was built in 1979 as the headquarters for PSEG and was renovated in 2015. PSEG was the sole tenant at issuance. Since issuance, various smaller tenants have taken occupancy at the property and represent 6.0% of total base rent. The loan matured in October 2026.
- The loan was transferred to special servicing in October 2026 following its failure to pay off at maturity. The loan continues to face occupancy and refinancing concerns related to PSEG, the property's largest tenant (94.0% of total base rent), which has ceased operations at the property and is expected to vacate upon lease expiration in 2030. According to servicer commentary, the annual property inspection confirmed that PSEG went dark in November 2023, while various news sources indicate that the tenant intends to relocate upon lease expiration. According to the December 2025 rent roll, the property was 87.6% leased, unchanged from the prior review and compared to 85.8% at issuance. Given the ongoing challenges facing the office sector and the property's significant reliance on PSEG, the tenant's anticipated departure presents substantial rollover and re-leasing risk. Although PSEG's in-place rental rate of $18.65 per sf is below the Northern New Jersey office market average of $31.24 per sf, according to MCRE (REIS), the potential loss of the property's primary income source raises concerns regarding its ability to maintain cash flow and secure refinancing. The servicer reported occupancy of 88.0% and a DSC of 1.60x for YTD June 2026.
- KBRA's analysis resulted in an estimated loss of $32.0 million (27.5% estimated loss severity) on the whole loan balance of $116.3 million, of which $10.0 million of the estimated loss is allocated to this trust. The loss is based on a KBRA liquidation value of $84.3 million ($188 per sf). The value is derived using a direct capitalization approach based on a KNCF of $7.8 million and a capitalization rate of 9.25%.
Six of the ten remaining assets account for 22.8% of the pool balance, of which one REO asset (1.9%) is a K-LOC with an estimated loss.
Airport Industrial Center ($21.6 million, 6.4%, Current) is collateralized by the borrower's leasehold interest in ten industrial buildings totaling 1.1 million sf located with the Airport Industrial Center in Louisville, Kentucky. The property serves a mix of logistics, defense, manufacturing, and industrial users. The ground lease expires in April 2103. The servicer reported an occupancy of 98.0% and a DSC of 2.16x for YTD June 2026. The loan is scheduled to mature in November 2026.
172 5th Avenue ($15.8 million, 4.7%, Current) is collateralized by a 10,542 sf mixed-use building located in the Flatiron neighborhood of New York City, one block south of Madison Square Park. Constructed in 1930 and renovated in 2016, the property comprises 25 residential apartment units above a 2,052 sf ground-floor retail space. At issuance, the retail space was fully leased to Rituals Cosmetics, which vacated in 2022. The space was subsequently backfilled by Hoka in March 2023 at a lower rental rate, under a lease scheduled to expire in March 2028. According to the December 2025 residential rent roll, all 25 apartment units were leased. The master servicer indicated that the borrower intends to pay off the loan at its November 2026 maturity; however, no definitive arrangements have been confirmed as of the current review. The servicer reported occupancy of 100% and a DSC of 1.42x for YTD June 2026.
Fox Chapel Shopping Center ($15.5 million, 4.6%, Current) is collateralized by a 114,344 sf anchored retail shopping center located in Germantown, Maryland. The property was constructed in 1987 and renovated in 1999. The collateral is anchored by Great Wall Supermarket (19.4% of total base rent; 45.2% of total sf), which subleases its space from Giant Food under a lease scheduled to expire in April 2027. According to recent news sources, Lotte Plaza Market has signed a lease to occupy the anchor space following Great Wall Supermarket's anticipated departure in 2027; however, KBRA has not independently confirmed the lease execution or terms as of the current review. According to the June 2026 rent roll, the property was 98.0% leased. While no lease expirations are scheduled through YE 2026, approximately 28.8% of total base rent is scheduled to expire in 2027, including the master lease with Giant Food (19.4%). The servicer reported occupancy of 98.0% and a DSC of 3.88x for YTD June 2026. The loan is scheduled to mature in November 2026, and according to master servicer commentary, a payoff statement has been requested through November 6, 2026.
12603 Southwest Freeway Office Building ($9.6 million, 2.8%, Current) is collateralized by a 142,009 sf office property located in Stafford, Texas, approximately 20 miles southwest of Houston. Constructed in 1982 and renovated in 2015, the property includes an adjacent two-story parking garage with 496 spaces. According to the March 2026 rent roll, the property was 93.3% leased; however, the property faces significant near-term rollover risk, with 37.1% of total base rent, representing 21 leases, scheduled to expire through YE 2027, inclusive of MTM leases. The scheduled expirations include the largest and third-largest tenants by base rent, which collectively account for 13.2% of total base rent and have leases that expire in 2027. The servicer reported an occupancy of 86.0% and a DSC of 1.84x for YTD June 2026. The loan is scheduled to mature in November 2026, and according to master servicer commentary, the borrower is in discussions with multiple lenders regarding potential refinancing.
Hampton Inn & Suites - University of Central Florida ($8.1 million, 2.4%, Current) The loan is collateralized by a 109-key limited-service hotel located in Orlando, Florida. The property was constructed in 1988 and renovated in 2015. The servicer reported a DSC of 1.44x for TTM June 2026. The loan is scheduled to mature in November 2026, and according to master servicer commentary, the borrower intends to refinance the loan at maturity, with financing term sheets currently under review.
55 East 59th Street (Office Condo) ($6.4 million, 1.9%, K-LOC, Specially Serviced, 90+ Days Delinquent) is a 12,342 sf office condominium located within Delmonico Plaza in Midtown Manhattan, New York City. Constructed in 1985, the property was transferred to special servicing in June 2025 due to imminent monetary default. According to special servicer commentary, discussions with the borrower are ongoing regarding a potential short sale, with a deed-in-lieu being considered as an alternative. A September 2025 appraisal valued the property at $6.2 million ($502 per sf), a 47.0% decline from its issuance value of $11.7 million ($948 per sf). The decline in value resulted in an ARA of $1.3 million and a cumulative ASER of $64,531. The servicer reported occupancy of 58.0% and a DSC of -0.31x for YTD March 2025. KBRA's analysis resulted in an estimated loss of $2.5 million (38.6% loss severity) on the $6.4 million outstanding loan balance, based on a liquidation value of $4.5 million ($365 per sf), reflecting a distressed disposition of the asset in its non-stabilized condition.
Details concerning the withdrawn ratings are as follows:
- Class X-A to WR from AAA (sf)
- Class X-B to WR from AAA (sf)
- Class X-D to WR from D (sf)
- Class X-E to WR from D (sf)
- Class X-F to WR from D (sf)
Details concerning the rating downgrades are as follows:
- Class A-M to AA (sf) from AAA (sf)
- Class V1A to AA (sf) from AAA (sf)
Details concerning the rating affirmations are as follows:
- Class A-4 at AAA (sf)
- Class B at BB (sf)
- Class C at CCC (sf)
- Class D at D (sf)
- Class E at D (sf)
- Class F at D (sf)
- Class V1B at BB (sf)
- Class V1C at CCC (sf)
- Class V1D at D (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.