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KBRA Withdraws One Rating and Affirms All Other Ratings for RCMT 2016-3

21 Nov 2025   |   New York

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KBRA affirms all of its outstanding ratings for the outstanding principal and interest classes of RCMT 2016-3, a $22.0 million small balance commercial transaction. Additionally, KBRA withdraws its AAA (sf) rating for the interest-only Class IO – B/C/D, pursuant to its methodology, as there are only 8 loans remaining in the pool. The affirmations follow a surveillance review of the transaction, which has exhibited performance in line with KBRA’s last ratings change in November 2024.

Since securitization, 52 loans have paid off (79.5% of the original pool balance) and the transaction has realized $8.6 million in cumulative principal losses. As a result of the payoffs, the pool has become concentrated with four (37.2% of the pool balance) of the remaining 8 loans in the pool identified as underperforming loans, three of which (35.1%) are K-LOCs. This is offset by the transaction performance, which has experienced a continued increase in credit enhancement levels at the top of the capital structure due to deleveraging from amortization and loan payoffs.

The underperforming loans and K-LOCs are detailed below:

Neighborhood Retail Center (3rd largest, 14.6%, K-LOC, Underperform)

  • The loan is collateralized by a 23,230-sf unanchored retail center in Staten Island, New York, approximately 20 miles southwest of Lower Manhattan.
  • KBRA maintains its K-LOC designation and KPO of Underperform based on operating expenses outpacing revenue growth, resulting in a below breakeven DSCR. Servicer-reported NCF declined from $413,000 in 2021 to $182,000 for the 6 months ended June 2025, resulting in a below breakeven DSCR. The loan is scheduled to mature in February 2026.
  • The servicer-reported occupancies and DSCs are: 100% / 0.98x (YTD June 2025), 100% / 0.88x (FY 2024), 100% / 0.90x (FY 2023); 100% / 1.06x (FY 2022); at issuance these were 100% / 1.25x. As of October 2025, 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 $701,041 (21.9% estimated loss severity) on the whole loan balance of $3.2 million. The loss is based on a value of $3.0 million ($129 per sf), which considers a distressed non-stabilized disposition of the asset as well as comparable market values.

Applewood Grove Shopping Center (5th largest, 12.9%, K-LOC, Underperform)

  • The loan is collateralized by is collateralized by a 66,946 sf, 1960-vintage unanchored retail complex located in Golden, Colorado, approximately nine miles west of the Denver CBD.
  • KBRA maintains the loan’s K-LOC designation and KPO of underperform due to low occupancy and elevated rollover risk in the near-term. Occupancy was most recently reported at 67.0% as of June 2025, with leases representing 59.0% of the GLA scheduled to expire during the following 24 months. According to the servicer, the loan paid off in full on October 29, 2025 and the payoff is anticipated to be reflected in the November 2025 remittance cycle.
  • The servicer-reported occupancies and DSCs are: 67.0% / 0.24x (YTD June 2025), 70.0% / 1.05x (FY 2024), 75.0%/1.02x (FY 2023); 64.0%/1.51x (FY 2022); at issuance these were 78.0% /1.13x. At this time, KBRA does not estimate a loss on this asset.

Washington Plaza (6th largest, 7.6%, K-LOC, Underperform)

  • The loan is collateralized by a 57,347-sf retail property in East Point, Georgia, approximately nine miles southwest of Atlanta.
  • KBRA identifies the loan as a K-LOC and maintains its KPO of Underperform based on a decline in collateral occupancy and lease rollover concerns. As of June 2025, occupancy was reported at 53.0%, down from 95.0% in June 2024. Piggly Wiggly (formerly 2nd largest tenant, 47.18% of GLA) downsized at lease expiration in December 2024 (11,237 sq ft ,19.6%) and currently operates under a month-to-month lease. MiTurn Group LLC (formerly 3rd largest tenant, 7.0% of GLA) vacated prior to the lease expiration in June 2028. The loan is scheduled to mature in March 2026.
  • The servicer-reported occupancies and DSCs are: 53.0% / 1.79x (YTD June 2025), 63.0%/1.65x (FY 2024), 95.0%/1.47x (FY 2023); 79.0%/1. 67x (FY 2022); at issuance these were 91.0% /1.23x. At this time, KBRA does not estimate a loss on this asset.

Dollar General (8th largest, 2.1%, Underperform)

  • The loan is collateralized by a 9,002-sf, free standing retail property located in St. Augustine, Florida. The property is subject to a long-term lease with Dollar General (100%).
  • KBRA maintains a KPO of Underperform for this loan based on increasing operating expenses which have resulted in a decreasing NCF. The servicer-reported NCF for FY 2024 was $97,796, which represents a 22.5% decline from the $126,110 underwritten by the issuer at closing. Servicer-reported operating expenses for FY 2024 were $36,062, which represents a 26.5% increase from the $28,518 underwritten by the issuer at closing. The loan is scheduled to mature in April 2026.
  • The servicer-reported occupancies and DSCs are: 100% / 1.13x (YTD June 2025), 100% / 1.01x (FY 2024), 100% / 1.03x (FY 2023); 100% / 1. 13x (FY 2022); at issuance these were 100% /1.31x.

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 asset in the transaction, as well as the continuing magnitude and extent of interest shortfalls on the certificates.

Details concerning the affirmed ratings are as follows:

  • Class D affirms the rating of AA- (sf)
  • Class E affirms the rating of BBB (sf)
  • Class F affirms the rating of B- (sf)
  • Class G affirms the rating of CC (sf)

To access ratings and relevant documents, click here.

Related Publication

Methodologies

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

Doc ID: 1012439