Fitch Ratings has affirmed 14 classes of SG Commercial Mortgage Securities Trust, commercial mortgage pass-through certificates, series 2016-C5 (SGCMS 2016-C5).

The Rating Outlooks have been revised to Stable from Negative on five classes and remain Negative on three classes.

RATING ACTIONS

Entity / Debt

Rating

Prior

SGCMS 2016-C5

A-2 78419CAB0

LT

AAAsf

Affirmed

AAAsf

A-3 78419CAC8

LT

AAAsf

Affirmed

AAAsf

A-4 78419CAD6

LT

AAAsf

Affirmed

AAAsf

A-M 78419CAF1

LT

AAAsf

Affirmed

AAAsf

A-SB 78419CAE4

LT

AAAsf

Affirmed

AAAsf

B 78419CAK0

LT

AA-sf

Affirmed

AA-sf

C 78419CAL8

LT

A-sf

Affirmed

A-sf

D 78419CAV6

LT

BBB-sf

Affirmed

BBB-sf

E 78419CAX2

LT

B-sf

Affirmed

B-sf

Page

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VIEW ADDITIONAL RATING DETAILS

KEY RATING DRIVERS

Stable Loss Expectations: While Fitch's base case loss expectations have remained relatively stable since Fitch's prior rating action, the Outlook revisions to Stable from Negative reflect the better than expected performance of loans expected to be affected by the coronavirus pandemic. Fifteen loans (41.6% of pool), including eight (19.3%) in special servicing, were designated Fitch Loans of Concern (FLOCs).

Fitch's current ratings reflect a base case loss of 6.90%. The Negative Outlooks reflect losses that could reach 7.50% after factoring in an additional sensitivity on one retail loan (4.4%) and one hotel loan (2.1%) to reflect vulnerability to the ongoing pandemic.

The largest contributor to Fitch's loss expectations, TEK Park (3.2%), is secured by a 514,033 sf office and technology park in Breinigsville, PA. The loan, which is sponsored by Eli Sternbuch, recently transferred to special servicing in January 2022 for imminent monetary default. The property faces vacancy and near-term rollover risks including Buckeye Partners (15.5% NRA) whose lease expired in October 2021 and the largest tenant, CyOptics (26.4% NRA), whose lease expires in October 2023. Occupancy and servicer reported NOI debt service coverage ratio (DSCR) for this amortizing loan were 61% and 1.55x as of the YTD September 2021 compared with 79% and 1.32x at YE 2020. Fitch's base case loss of approximately 25% reflects a 10.50% cap rate and 15% total haircut to the YE 2020 NOI.

Regional Mall FLOCs: The largest loan in the pool, The Mall at Rockingham Park (6.0%), is secured by 540,867 sf of an approximate one million sf regional mall in Salem, NH. The loan was designated a FLOC due to low occupancy after departure of collateral anchor, Lord and Taylor (29.3% NRA and 2.7% of base rents), which closed this location in December 2020 after filing for Chapter 11 Bankruptcy. As a result, collateral occupancy declined to 55% as of June 2021 from 89% as of September 2020. Servicer-reported NOI DSCR for this full-term IO loan was 1.89x as of the YTD June 2021 compared with 1.98x at YE 2020, 2.11x at YE 2019 and 2.31x at issuance.

Per the September 2021 rent roll, near-term rollover includes 13.7% NRA by 2022 spread across 34 tenants. In-line tenant sales continue to remain strong at $1,361 psf ($518 psf excluding Apple) as of the TTM ended November 2021 compared with $816 psf ($413 psf excluding Apple) as of the TTM ended November 2020 and $1,020 psf at YE 2019 ($542 psf excluding Apple) at YE 2019.

The loan is sponsored by Mayflower Realty (joint venture of Simon Property Group and the Canadian Pension Plan Investment Board) and Institutional Mall Investors. The remaining anchors are Macy's and JCPenney, which are both non-collateral. Dicks Sporting Goods subleases a portion of a non-collateral (Seritage owned) former Sears space. A 12-screen Cinemark theater opened on the Seritage parcel in December 2019. Fitch's base case loss of approximately 8% reflects a 15% cap rate and 15% total haircut to the YE 2020 NOI.

Peachtree Mall (3.0%) is secured by 621,367 sf of an 822,443 sf regional mall located in Columbus, GA and sponsored by Brookfield Properties Retail Group. The loan was designated a FLOC due to declining occupancy and cash flow/DSCR given the secular consumer shift away from traditional regional mall retail. The mall is anchored by a non-collateral Dillard's and collateral tenants that include JCPenney, At Home and Macy's. Per the June 2021 rent roll, the collateral was 87% occupied, which is down from 93% in 2020 and from its previous high of 98% in 2018. Servicer-reported NOI DSCR for this amortizing loan was 1.49x as of the YTD September 2021 compared with 1.56x at YE 2020 and 1.69x at YE 2019.

Comparable in-line tenant sales were $435 psf for the TTM ended September 2021, up from $334 psf at YE 2020, $383 psf at YE 2019 and $409 psf at issuance. Tenants comprising approximately 10.3% of the NRA have leases scheduled to expire by YE 2022 with another 22.8% scheduled to expire in 2023, including At Home (13.8% NRA). Fitch's base case loss of approximately 23% reflects a 20% cap rate and 5% total haircut to the YE 2020 NOI.

Alternative Loss Consideration: Fitch applied a sensitivity to AG Lifetime Fitness Portfolio (4.4%) to reflect non-credit worthy single tenant/binary risks and special use nature of the properties and a pandemic related stress to Residence Inn by Marriott LAX (2.1%) due to the hotel's vulnerability to the ongoing pandemic. This sensitivity analysis contributed to the Negative Outlooks.

Increasing Credit Enhancement (CE): As of the January 2022 distribution date, the pool's aggregate balance has been reduced by 8.9% to $671.2 million from $736.8 million at issuance. Since Fitch's prior rating action, three loans with a $14.7 million combined balance paid in full. One specially serviced loan with a $13.6 million balance was disposed with a $1.9 million loss to the trust. Twenty-four loans (41.5%) are amortizing balloon, eight (34.2%) are full-term IO and 11 (24.3%) that were structured with a partial-term IO component at issuance are in their amortization periods. One loan (2.2%) is fully defeased. Actual realized losses of $1.9 million and cumulative interest shortfalls of $1.1 million are currently affecting the non-rated class G.

Pool Concentration: The top 10 loans comprise 46.7% of the pool. Loan maturities are concentrated in 2026 (66.9%), with three loans (11.1%) maturing in 2022 and 10 (22.0%) in 2025. Based on property type, the largest concentrations are retail at 33.3%, office at 32.6% and hotel at 18.9%.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Downgrades of the 'AAAsf' classes are not likely due to sufficient CE and the expected receipt of continued amortization but could occur if interest shortfalls affect the class. Classes B, X-B, C and D would be downgraded if interest shortfalls affect the class, additional loans become FLOCs or if performance of the FLOCs deteriorates further. Classes E, X-E, F and X-F would be downgraded if loss expectations increase, additional loans transfer to special servicing or losses are realized.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

Upgrades of classes B, X-B, C and D may occur with significant improvement in CE and/or defeasance, but would be limited based on sensitivity to concentrations or the potential for future concentration. Classes would not be upgraded above 'Asf' if there is a likelihood for interest shortfalls. Upgrades of classes E, X-E, F and X-F could occur if performance of the FLOCs improves significantly and/or if there is sufficient CE, which would likely occur if the non-rated classes are not eroded and the senior classes pay-off.

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

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