Fitch Ratings has affirmed 12 classes of Citigroup Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2016-P6 (CGCMT 2016-P6).

In addition, Fitch has revised the Rating Outlooks on two classes to Positive from Stable and one class to Stable from Negative.

RATING ACTIONS

Entity / Debt

Rating

Prior

CGCMT 2016-P6

A-4 17291EAV3

LT

AAAsf

Affirmed

AAAsf

A-5 17291EAW1

LT

AAAsf

Affirmed

AAAsf

A-AB 17291EAX9

LT

AAAsf

Affirmed

AAAsf

A-S 17291EAY7

LT

AAAsf

Affirmed

AAAsf

B 17291EAZ4

LT

AA-sf

Affirmed

AA-sf

C 17291EBA8

LT

A-sf

Affirmed

A-sf

D 17291EAA9

LT

BBB-sf

Affirmed

BBB-sf

E 17291EAC5

LT

BB-sf

Affirmed

BB-sf

F 17291EAE1

LT

CCCsf

Affirmed

CCCsf

Page

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VIEW ADDITIONAL RATING DETAILS

KEY RATING DRIVERS

Improved Loss Expectations: Overall pool performance is stable from last review with loss expectations lower than the prior rating action, primarily due to stabilizing performance of loans affected by the pandemic and better than expected outcomes of disposed loans with realized losses less than expected. The revised Outlook to Stable from Negative on class F reflects overall stabilization of the pool while the Positive Outlooks on classes B and X-B reflect the potential for upgrade with further paydown of the pool and continued stable performance.

Fitch's ratings incorporate a base case loss of 4.9%. Seven loans (34% of the pool) were identified as Fitch Loans of Concern (FLOCs). No loans are in special servicing.

Fitch Loans of Concern: The largest FLOC, 8 Times Square & 1460 Broadway (8.4%), is secured by a 214,341-sf mixed-use retail/office property in Times Square, Manhattan. The collateral is fully occupied by two tenants: WeWork (83.1% of NRA, 53.1% of GPR; August 2034 lease expiration), which occupies the entire office portion of the property at below market rents; and Foot Locker (16.9% of NRA, 46.9% of GPR; August 2032 lease expiration), which occupies the first-floor retail space.

WeWork continues to face challenges in the current environment, closing offices in numerous locations and grappling with operating losses since going public in October 2021. As of September 2022, both WeWork and Foot Locker remain open for business. The servicer-reported NOI debt service coverage ratio (DSCR) increased to 1.97x at YE 2021 from 1.85x at YE 2020.

The second-largest FLOC, 681 Fifth Avenue (6.5%), is secured by a 17-story, 82,573-sf mixed-use building located on the southeast corner of 54th Street and 5th Avenue in Midtown Manhattan. The largest tenants include Metropole Realty Advisors (9.2% of NRA; through March 2029), Vera Bradley (7.1%; March 2026) and Apex Bulk Carriers (7.1%; March 2023). Physical occupancy remains at 58.6% as of the June 2022 rent roll after Tommy Hilfiger (27.3%) went dark in March 2019.

Tommy Hilfiger is obligated to continue paying its rent through its May 2023 lease expiration. Additionally, Tommy Hilfiger's lease included a letter of credit security deposit for $6.66 million ($296 psf). The servicer-reported NOI DSCR has increased to 1.73x as of YE 2021 from 1.64x at YE 2020 primarily due to annual rental escalations.

The largest improvement in expected losses is the 925 La Brea Avenue loan, which is secured by a 63,331-sf mixed-use property in West Hollywood, CA. The building was built in 2016 and originally occupied by two tenants, WeWork (75% of NRA) and Burke Williams (25%) Spa. WeWork vacated their space in early 2021. A new lease for approximately 31,000 sf has been executed which would bring occupancy to 74%. Terms of the lease were unavailable. Fitch's loss estimate of 11% assumes a cap rate of 9.0% and a 10% stress to the 2020 NOI to account for the new lease backfilling a portion of the vacant space.

Increasing Credit Enhancement: As of the August 2022 distribution date, the pool's aggregate principal balance has been paid down by 22.6% to $706.8 million from $913.4 million at issuance. Three loans (2.4% of current pool) are fully defeased. Since the prior rating action, the Fairfield Inn & Suites Milwaukee Downtown loan, which was secured by 103-key limited service hotel in Milwaukee WI, was disposed. The loan was liquidated with $5.5 million in losses representing a 52% loss severity. The recovery was in excess of Fitch's estimated value, which reflected staffing and operational issues in conjunction with declining performance prior to the pandemic.

Eight additional loans (18.1% of the original deal balance) have paid prior to or at maturity in the second half of 2021. Loan maturities are concentrated in 2026 (95%) with an additional 2.4% maturing in 2023 and 2.7% in 2027. Cumulative interest shortfalls totaling $416,435 are currently impacting the non-rated class H.

Undercollateralization: The transaction is undercollateralized by approximately $530,607 due to a WODRA on the Sheraton Portland Airport loan, which was reflected in the August 2021 remittance report.

RATING SENSITIVITIES

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

Downgrades would occur with an increase in pool level losses from underperforming or specially serviced loans. Downgrades to the 'AA-sf' and 'AAAsf' categories are not likely due to the position in the capital structure, but may occur should interest shortfalls affect the classes;

Downgrades to the 'BBB-sf' and A-sf' category would occur should overall pool losses increase significantly and/or one or more large loans have an outsized loss, which would erode CE. Downgrades to the 'BB-sf' and 'CCCsf' categories would occur should loss expectations increase and if performance of the FLOCs fail to stabilize or loans default and/or transfer to the special servicer and as losses are realized.

Fitch has identified both a baseline and a worse-than-expected, adverse stagflation scenario based on fallout from the Russia-Ukraine war whereby growth is sharply lower amid higher inflation and interest rates; even if the adverse scenario should play out, Fitch expects virtually no impact on ratings performance, indicating very few rating or Outlook changes. However, for some transactions with concentrations in underperforming retail exposure, the ratings impact may be mild to modest, indicating some changes on sub-investment grade notes.

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

Factors that could lead to upgrades would include stable to improved asset performance coupled with pay down and/or defeasance. Upgrades of the 'A-sf' and 'AA-sf' categories would likely occur with significant improvement in CE and/or defeasance; however, adverse selection, increased concentrations and further underperformance of the FLOCs could cause this trend to reverse.

Upgrades to the 'BBB-sf' category would be limited based on sensitivity to concentrations or the potential for future concentration. Classes would not be upgraded above 'Asf' if there is likelihood for interest shortfalls. Upgrades to 'BB-sf' and 'CCCsf' categories are not likely until the later years in a transaction and only if the performance of the remaining pool is stable and there is sufficient CE to the classes.

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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