Colony Starwood Homes 2016-1 Trust

Morningstar Contacts

Preliminary Ratings (as of May 19, 2016)

Lead Analyst

Class

Balance ($)

Morningstar
Preliminary Rating

Morningstar
Bond DSCR (x)

Morningstar
BLTV (%)

Morningstar
ELTV (%)

Credit Support
Level (%)

Class A
Class B
Class C
Class D
Class E
Class F
Class G

266,320,000
58,747,000
46,997,000
43,081,000
70,496,000
23,499,000
26,797,000

AAA
AA
A
BBB+
BBB
BBBNR

>2.3
>1.9
>1.6
>1.4
>1.1
>1.0
N/A

34.0
41.5
47.5
53.0
62.0
65.0
N/A

34.0
41.5
47.5
53.0
62.0
65.0
N/A

50.3
39.3
30.6
22.5
9.4
5.0
N/A

Total
Offered:
Total
Issuance:

509,140,000

Kevin Dwyer   +1 646 560-4525
Kevin.Dwyer@morningstar.com
Back-up Analyst
Brian Alan   +1 646 560-4516
Brian.Alan@morningstar.com
Analytical Manager
Brian Grow   +1 646 560-4513
Brian.Grow@morningstar.com

535,937,000

Business Development
Brian Vonderhorst   +1 646 560-4507
Brian.Vonderhorst@morningstar.com
Website
https://ratingagency.morningstar.com

To determine the preliminary ratings on each class of securities issued by the trust, Morningstar analyzed the properties securing the loan as enumerated herein
to determine their stabilized as-is net cash flow and values. The loan, along with its corresponding as-is NCF and property values, was then subjected to a series
of economic and lending environment stresses in our proprietary single-family rental subordination model to estimate the expected loss at each rating category.
A description of this model is attached as Appendix A to this report. The beginning loan-to-value ratio reflects the closing LTV. The ending LTV reflects the LTV at
the end of five years. The debt service coverage ratio is the initial ratio of the Morningstar base-case net cash flow over debt obligation. Credit-support levels
are a percentage of the total offered certificates.

Estimated Closing Date: June 7, 2016
Solely to the extent and subject to the scope of review enumerated herein, this report and the preliminary ratings noted above address certain credit risks and the extent to which the payment stream of the collateral is
adequate to make payments required under the certificates based on information identified as subject to review herein and to the extent provided to Morningstar on the arranger’s website or email for this transaction as of May
19, 2016. The below analysis, as well as Morningstar’s ratings characteristics as described in Appendix C, further reflects the ratings analysis related to these preliminary ratings. Investors should be aware that the proposed
transaction and certain documents related thereto are not finalized. Following Morningstar’s receipt of final information and documentation, and the completion of Morningstar’s review of such information and documentation,
Morningstar may issue final ratings. Such final ratings may differ from the preliminary ratings enumerated herein.
Ongoing Surveillance Statement
Morningstar will monitor the ratings assigned to each class of certificates on an ongoing basis and may publish surveillance reports. Appendix B to this report provides details on our surveillance approach. Morningstar’s ability
to continually monitor this transaction is contingent on Morningstar’s continued timely receipt of certain information and data regarding the collateral and transaction.
This report is an opinion and does not constitute an offer to sell or a solicitation of an offer to buy any securities, and it may not be used or circulated in connection with any such offer or solicitation.
Morningstar publishes its current Form NRSRO and exhibits thereto at https://ratingagency.morningstar.com. Morningstar maintains internal policies and procedures to manage conflicts which may include payment structures
for ratings.

Transaction Spotlight
Collateral

Certificate Balance ($)
Certificate Balance (Offered) ($)
Structure
Morningstar U/W Closing DSCR (x)
Morningstar Trust U/W BLTV (%)
Morningstar Trust U/W ELTV (%)

ratingagency.morningstar.com

Single loan secured by first
priority mortgages in a pool of
3,566 single-family rental properties

Loan Seller

535,937,500

Depositor

509,140,000
Sequential
> 1.0
65.0
65.0

Lead Manager
Borrower
Trustee
Servicer
Special Servicer
Certificate Administrator
Property Manager

1

JPMorgan Chase Bank, N.A

CSH Depositor LLC
J.P. Morgan; BofA Merrill Lynch; Citigroup
CSH 2016-1 Borrower, LLC
Wilmington Savings Fund Society, FSB, d/b/a Christiana Trust
Midland Loan Services (MOR CS1/Stable)
Midland Loan Services (MOR CS1/Stable)
Wells Fargo Bank, N.A.
Colony Starwood Homes Management, LLC

CSH 2016-1

 Ratings Rationale
Morningstar determined the preliminary ratings for each class of certificates by performing a quantitative and a qualitative collateral, structural, and legal
analysis. This analysis uses the Morningstar single-family rental subordination model and is based on its published criteria. (For details, see the
Ratings/Surveillance tab at https://ratingagency.morningstar.com.) Property-level stresses were developed for the analysis of single-family rental assets. Each
tranche survived the applicable rating stress scenario with no interest or principal shortfalls. Our analysis includes estimated base-case NCF by evaluating the
gross rent, concession, vacancy, operating expenses, and capital expenditure data. The Morningstar NCF analysis resulted in a minimum DSCR of greater than
1.0x. (For more details, see the Morningstar’s Analysis section below.)
Furthermore, Morningstar reviewed the third-party participants in the transaction, including the property manager, servicer and special servicer, and the BPO
provider. These transaction parties are acceptable to Morningstar. (For more details, see the Property Manager and Servicer Summary section.) Morningstar also
conducted legal review and nothing caused a rating concern to Morningstar. (For details, see the Scope of Analysis section on Page 34.)

ratingagency.morningstar.com

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CSH 2016-1

 Table of Contents
Morningstar Perspective ...................................................................................................................................................................................................... 5
Transaction Comparison....................................................................................................................................................................................................... 7
Transaction Overview ........................................................................................................................................................................................................... 8
Transaction Summary .............................................................................................................................................................................................................................. 8
Ratings Rationale ..................................................................................................................................................................................................................................... 2
Morningstar’s Analysis ............................................................................................................................................................................................................................ 8
Base-Case Credit and Cash Flow Assumptions .................................................................................................................................................................. 13
Rent Yields ............................................................................................................................................................................................................................................. 13
Gross Rental Yields: ............................................................................................................................................................................................................................... 13
Net Rental Yields: .................................................................................................................................................................................................................................. 15
Rental Income ........................................................................................................................................................................................................................................ 16
Mortgage Approach ............................................................................................................................................................................................................................... 16
Other Income .......................................................................................................................................................................................................................................... 16
Vacancy .................................................................................................................................................................................................................................................. 16
Renewal Rate ......................................................................................................................................................................................................................................... 16
Taxes ....................................................................................................................................................................................................................................................... 16
Property-Management Fee.................................................................................................................................................................................................................... 17
HOA Expense .......................................................................................................................................................................................................................................... 17
Insurance Expense ................................................................................................................................................................................................................................. 17
Repairs and Maintenance and Other Costs .......................................................................................................................................................................................... 17
Leasing and Marketing/Turnover Costs ................................................................................................................................................................................................ 17
Capital Expenditure Reserves ................................................................................................................................................................................................................ 17
Cap Rate ................................................................................................................................................................................................................................................. 17
Net Cash Flow ........................................................................................................................................................................................................................................ 17
Property Valuation ................................................................................................................................................................................................................................. 17
Property Manager and Servicer Summary.......................................................................................................................................................................... 18
Property-Manager Review ..................................................................................................................................................................................................................... 18
Servicer and Special Servicer Review ................................................................................................................................................................................................... 20
Real Estate Agent Interviews ................................................................................................................................................................................................................ 21
Property Summary ............................................................................................................................................................................................................. 22
Geographic Composition ....................................................................................................................................................................................................................... 22
Property Composition ............................................................................................................................................................................................................................ 24
Tenant Summary ................................................................................................................................................................................................................ 26
Monthly Rent Analysis ........................................................................................................................................................................................................................... 26
Lease Terms ........................................................................................................................................................................................................................................... 28
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CSH 2016-1

 Loan Features/Concerns ..................................................................................................................................................................................................... 29
Loan Terms ............................................................................................................................................................................................................................................. 29
Accounts................................................................................................................................................................................................................................................. 29
Scheduled Loan Amortization ............................................................................................................................................................................................................... 29
Prepayment Protection .......................................................................................................................................................................................................................... 29
Releases of Properties ........................................................................................................................................................................................................................... 29
Substitution of Properties ...................................................................................................................................................................................................................... 29
Floating Rate Loan/Interest Rate Cap Agreement ............................................................................................................................................................................... 29
Debt Yield ............................................................................................................................................................................................................................................... 29
Trigger Period ......................................................................................................................................................................................................................................... 30
Events of Default .................................................................................................................................................................................................................................... 30
Insurance ................................................................................................................................................................................................................................................ 30
Litigation................................................................................................................................................................................................................................................. 30
Reserves ................................................................................................................................................................................................................................................. 30
Third-Party Property Review .................................................................................................................................................................................................................. 30
Property Covenants ................................................................................................................................................................................................................................ 31
SPE and Bankruptcy Remoteness ......................................................................................................................................................................................................... 31
Cash Management ................................................................................................................................................................................................................................ 31
Securitization Trust Summary ............................................................................................................................................................................................ 32
Structure................................................................................................................................................................................................................................................. 32
Priority of Payments on Certificates ...................................................................................................................................................................................................... 32
Allocation of Realized Losses on Certificates ....................................................................................................................................................................................... 32
Rated Final Distribution Date ................................................................................................................................................................................................................ 32
Trust Structural Features/Concerns ................................................................................................................................................................................... 33
Directing Certificateholder/Controlling Class ....................................................................................................................................................................................... 33
Replacement of Special Servicer........................................................................................................................................................................................................... 33
Limited Rating Agency Confirmation/Notice ........................................................................................................................................................................................ 33
Repurchase Obligation .......................................................................................................................................................................................................................... 33
Conflicts of Interest ................................................................................................................................................................................................................................ 34
Representations, Warranties and Enforcement Mechanisms ............................................................................................................................................................. 34
Scope of Analysis ............................................................................................................................................................................................................... 34
Appendix A: Morningstar Single-Family Rental Subordination Model ............................................................................................................................... 35
Appendix B: Morningstar Rating Surveillance ................................................................................................................................................................... 36
Appendix C: Morningstar Rating Characteristics ............................................................................................................................................................... 37

ratingagency.morningstar.com

4

CSH 2016-1

 Morningstar Perspective
Geographic Concentration: The trust’s 3,566 properties are in eight states, with the largest concentration by broker price opinion value in Florida (28.9%).
The largest metropolitan statistical area is Atlanta (15.2%), followed by Tampa, Florida (8.6%). The geographic concentration dictates the home-price
stresses applied to the portfolio.
Net Cash Flow: Morningstar’s assumed base-case net cash flow is approximately $24.6 million, which is 24.6% lower than the underwritten NCF of $32.7
million. Stressing the NCF during the term of the loan and at the maturity date reflects worsening economic conditions that are consistent with
Morningstar’s rating stresses.
Property Management: Colony Starwood Homes internally manages properties via an indirect majority-owned subsidiary, Colony Starwood Homes
Management, LLC. Morningstar visited the property manager CSH in its Scottsdale, Arizona, office in December 2015 and had a follow-up conference call
in April 2016 to discuss the Colony American Homes and Starwood Waypoint merger. Upon completion of the review, Morningstar considered CSH an
acceptable property manager.
Homeowners Associations: Approximately 55.6% of the pool’s properties by BPO value are in a homeowners association. The borrower represents that
there are no HOA delinquencies as of the cutoff date. The borrower is required to escrow HOA fees for properties where HOA fees are superior to and
could extinguish a first mortgage lien.
Vacancy: As of the April 1, 2016, cutoff date, 2.5% of the properties in the transaction were vacant.
Year Built and Initial Capital Expenditure: The average year built for properties in this transaction is 1993. Upfront capital expenditure averaged $24,749,
or 16.0% of the average purchase price.
Rental Yields: Gross rental yield measured by gross potential rent/issuer BPO value is 8.3%. Gross rental yield using Morningstar’s annual gross potential
rent/ issuer BPO value is 8.0%. Net rental yields for the pool using Morningstar’s BBB rating stress assumptions are at 2.8%. Rental yield is an important
metric that a single-family rental investor may consider when looking to buy properties.
Rental Income: Morningstar does not solely rely on the actual rent provided in the data tape. Instead, an assigned rent incorporating the actual rent,
concession adjustments, third-party rental data points, and a mortgage payment assumption is used. Morningstar’s annual assigned rent for this pool is
$62.8 million compared with the issuer’s reported gross potential annual rents of $64.6 million.

ratingagency.morningstar.com

5

CSH 2016-1

 



The Bulls Say
 Actual gross rents are close to market rents.
 Gross rental yield measured by gross potential rent/issuer BPO value is 8.3%. Gross rental yield using Morningstar’s annual gross potential
rent/issuer BPO value is 8.0%. Gross rental yield is in line with previous single-family rental transactions. This trend holds even within similar
MSAs (Exhibit 3).
 Higher expected renewal rates compared with multifamily rental properties.
 Green River Capital, LLC provided BPO values. GRC is ranked MOR RV1/Stable as a residential vendor (REO asset management), MOR
RS1/Stable as a residential component servicer (short sales), and MOR RV2/Stable as a residential vendor (single-family rental propertymanagement and surveillance services).
 The collateral is 100% single-family residential houses.
The Bears Say
 The use of multifamily MSA-level cap rates as a proxy in the absence of historical single-family rental cap rate data is a risk. This risk was
mitigated by adding an upward adjustment of 50 basis points to the capitalization rate for this portfolio.
 Lacking credit measures such as the income/rent ratio in the eligible tenant provision resulted in a qualitative adjustment of 1.0% gross rent
reduction for this transaction. Morningstar has made similar adjustments on prior single-family rental transactions.
 Underwritten capital expenditure is lower than Morningstar’s amount. Morningstar assumes higher capital expenditure based on observed
sample of performance data.

ratingagency.morningstar.com

6

CSH 2016-1

 Transaction Comparison
Deal Name

CSH 2016-1

HPA 2016-1

PRD 2015-SFR3

AH4R 2015-SFR2

IH 2015-SFR3

4/1/2016
6/7/2016
783,291,763
3,566
70,000-750,000
219,656
52,680-695,755
192,375
1907-2014
1993
0-146,036
24,749
800-3,850*
1,510*
3-24
12.3
0-21
6.2
3.4
2.5
100.0

11/30/2015
2/4/2016
654,523,539
2,232
79,000-857,000
293,245
73,908-760,822
285,538
1886-2015
1991
0-125,777
5,701
1,050-4,890*
2,160*
6-36
12.6
0-24
7.2
0.0
0.4
97.9

9/25/2015
11/3/2015
593,371,291
3,164
78,000-568,000
187,538
57,728-516,845
171,554
1975-2015
2003
0-65,511
13,039
730-3,215*
1,428*
7-37
13.6
0-25
9.9
0.2
4.0
100.0

8/1/2015
9/22/2015
717,310,851
4,125
76,900-440,000
173,894
60,206-396,814
172,476
1991-2014
2003
690-52,399
15,995
1,000-3,125*
1,434*
6-24
12.4
1-24
8.1
1.5
0.0
100.0

4/30/2015
6/25/2015
1,524,862,868
7,265
31,000-1,115,000
209,892
40,341-817,216
203,588
1869-2013
1986
0-229,559
22,984
500-4,500*
1,461*
6-38
15.5
0-36
8.3
1.6
2.9
99.1

Property Type (% by BPO)

Single-Family (100.0)

Single-Family (97.5)

Single-Family (99.9)

Single-Family (99.3)

Single-Family (98.1)

Percent of Properties w/ Pool (% by BPO)
Section 8 (% by BPO)
Top 5 State (% by BPO)

11.7
0.0
FL (28.9), GA (15.7),
TX (12.9), CA (10.8),
CO (10.5)
Atlanta, GA (15.2),
Tampa, FL (8.6), Las
Vegas, NV (7.7),
Denver-Aurora, CO
(7.4), Dallas-PlanoIrving, TX (6.1)

14.8
0.0
TX (19.2), IL (18.6), FL
(16.2), CO (12.8), GA
(11.0)
Chicago, IL (16.6),
Atlanta, GA (10.9),
Dallas-Plano-Irving,
TX (10.0), DenverAurora, CO (8.8),
Orlando, FL (5.1)

5.3
0.7
FL (30.2), TX (18.7), NC
(13.1), TN (11.1), AZ
(8.1)
Houston, TX (10.3),
Tampa, FL (8.5),
Charlotte, NC (8.5),
Phoenix, AZ (8.1),
Indianapolis, IN (7.0)

Servicer (% by BPO)

34953 (1.5), 30052
(1.2), 30157 (1.0),
77073 (0.9), 28078
(0.9)
Midland (100.0)

75033 (1.1), 60423
(0.8), 80134 (0.8),
80550 (0.7), 75078
(0.7)
Midland (100.0)

37128 (2.2), 28269
(1.5), 32712 (1.3),
46060 (1.0), 85353
(1.0)
Midland (100.0)

0.2
0.0
NC (22.0), TX (21.7),
SC (18.5), OH (12.3),
UT (10.6)
Charlotte, NC (9.3),
Columbus, OH (7.9),
Indianapolis, IN
(7.5), Houston, TX
(7.5), GreenvilleMaudlin-Easley, SC
(7.2)
29681 (2.4), 84015
(1.4), 29680 (1.4),
43110 (1.3), 27610
(1.3)
Midland (100.0)

11.5
2.7
FL (32.7), CA (15.5),
GA (12.9), IL (10.3),
WA (8.5)
Atlanta, GA
(12.7),Chicago, IL
(9.6), Fort
Lauderdale, FL (6.9),
Minneapolis-St Paul,
MN (6.3), Phoenix,
AZ (5.3)
93536 (0.8), 32259
(0.8), 32092 (0.6),
60634 (0.6), 33021
(0.6)
Midland (100.0)

Special Servicer (% by BPO)

Midland (100.0)

Midland (100.0)

Midland (100.0)

Midland (100.0)

Midland (100.0)

Collateral Cutoff Date
Estimated Closing Date
Total BPO Value ($)
Number of Properties
BPO Range ($)
Average BPO Value ($)
Cost Basis Range (postrenovation) ($)
Average Cost Basis (postrenovation) ($)
Range of Year Built
Average Year Built
Actual Rehab Cost Range ($)
Average Actual Rehab Cost ($)
Range of Monthly Rental Payment ($)
Average Monthly Rental Payment ($)
Range of Original Lease Term (months)**
Average Original Lease Term (months)**
Range of Remaining Lease Term (months)**
Average Remaining Lease Term (months)**
Month-to-Month Leases (% by BPO)
Vacancy (% by BPO)
Rental Payments Current (% by BPO)

Top 5 MSA (% by BPO)

Top 5 ZIP Codes (% by BPO)

*Based on gross potential rent for vacant properties
** Month-to-month leases excluded

ratingagency.morningstar.com

7

CSH 2016-1

 Transaction Overview
Transaction Summary
The Colony Starwood Homes 2016-1 certificates, the first securitization brought from the merger of Starwood Waypoint Residential Trust and Colony American
Homes, Inc., are supported by the income streams and values from 3,566 rental properties. The properties are distributed across eight states and 31 MSAs in the
United States. Morningstar maps an MSA based on the ZIP code provided in the data tape, which may result in different MSA stratifications than those
provided in offering documents. As measured by BPO value, 57.5% of the portfolio is concentrated in three states: Florida (28.9%), Georgia (15.7%), and Texas
(12.9%). The average cost basis per property post renovation is $192,375 and the average BPO value is $219,656. The average age of the properties is roughly 23
years old. The majority of the properties have three or more bedrooms. The offered certificates represent a beneficial ownership in a two-year floating-rate loan,
extendable to a total of five years with an initial aggregate principal balance of approximately $535.9 million.

Morningstar’s Analysis
Morningstar’s analysis is based on information provided on the arranger’s website or through email as of May 19, 2016. Morningstar analyzed the portfolio of
residential rental properties and subjected the estimated aggregate NCF and assumptions to a variety of stresses in the Morningstar single-family rental
subordination model. Morningstar’s analysis of each property’s NCF is based on the property-level data provided by the issuer. For rental data, Morningstar
reviewed regional and property-level single-family rental market rent history from RentRange, LLC and available property-level rent information from third-party
sources for each property. For vacancy information, Morningstar used regional vacancy data from Reis, Inc. Of the properties included in this transaction, 97.5%
were rented as of the property cutoff date. The borrower represents as of the cutoff date that there are no HOA fee deficiencies outstanding. For a more
detailed review of Morningstar’s assumptions, see the Base-Case Credit and Cash Flow Assumptions section on Page 13.
Morningstar estimated the base-case NCF by evaluating the gross rent, concession, vacancy, operating expenses, and capital expenditure data from the abovementioned data sources. Morningstar then applied regional multifamily capitalization, or cap rates, sourced from Real Estate Research Corp. plus an additional
50 basis points at each property to determine the Morningstar base-case value for each property. Morningstar’s base-case underwriting yielded an aggregate
annualized NCF of approximately $24.6 million, which was 24.6% lower than the issuer underwritten NCF. Based on these assumptions, the Morningstar NCF
analysis resulted in a minimum DSCR of greater than 1.0x.
Table 1 - Analytical and Underwriting Metrics

× Morningstar’s base case NCF is 24.6% lower than the issuer’s underwritten NCF.
Metric

Morningstar UW ($)

Percent of Gross Income

Issuer UW ($)

Percent of Gross Income

62,823,927
62,823,927

100.0
0.0
100.0

64,628,812
64,628,812

100.0
0.0
100.0

6,467,905

10.3*

4,556,623

7.1

Real Estate Taxes

10,863,363

17.3

10,463,814

16.2

Property-Management Fee
HOA Expense
Insurance Expense
Repairs and Maintenance
Leasing/Marketing/Maintenance Turnover Costs
Total Expenses

5,024,764
1,070,198
1,058,782
4,001,885
5,359,350
27,378,342

8.0
1.7
1.7
6.4
8.5
43.6

3,604,367
1,070,198
1,020,014
3,638,077
4,186,992
23,983,462

5.6
1.7
1.6
5.6
6.5
37.1

Capital Expenditures
Net Cash Flow

4,337,300
24,640,381

6.9
39.2

3,423,804
32,664,923

5.3
50.5

Rental Income
Other Income
Gross Income
Vacancy

*includes qualitative adjustments
Source: Morningstar Credit Ratings, LLC

ratingagency.morningstar.com

8

CSH 2016-1

 Table 2 - Analytical and Underwriting Metrics – Morningstar Underwriting

× Morningstar’s NCF for CSH 2016-1 is in line with recent issuance.
Metric

CSH
2016-1

HPA
2016-1

PRD
2015-SFR3

AH4R 2015SFR2

IH
2015-SFR3

CAH
2015-1

PRD
2015-SFR2

Rental Income (%)

100.0

100.0

100.0

100.0

100.0

100.0

100.0

Other Income (%)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Gross Income (%)

100.0

100.0

100.0

100.0

100.0

100.0

100.0

Vacancy (%)

10.3*

8.0*

10.4*

9.0*

9.8*

10.3*

10.0*

17.3

23.0

15.8

17.0

17.2

15.9

15.5

Property-Management Fee (%)

8.0

7.0

8.0

6.0

6.0

8.0

8.0

HOA Expense (%)

1.7

1.5

2.3

1.7

1.9

1.7

2.2

Insurance Expense (%)

1.7

1.8

1.5

1.0

2.1

2.9

1.7

Repairs and Maintenance (%)

6.4

7.6

6.0

6.0

6.9

7.0

6.2

Leasing/Marketing/Maintenance Turnover Costs (%)

8.5

9.6

13.1

4.7

7.0

9.7

13.6

43.6

50.5

46.6

36.3

41.1

45.2

47.2

6.9

6.6

7.4

6.8

7.1

6.8

7.4

39.2

34.9

35.6

47.9

42.0

37.8

35.3

Real Estate Taxes (%)

Total Expenses (%)
Capital Expenditures (%)
Net Cash Flow (%)
*includes qualitative adjustments
Source: Morningstar Credit Ratings, LLC

Morningstar evaluated the property values of the CSH 2016-1 transaction based on two methods: a home-price index method and a direct capitalization value
method. For the HPI-derived value, Morningstar applied an MSA-level property value discount assumption for each asset to determine the HPI stressed property
value. Morningstar assumes no HPI appreciation for the regions in this portfolio in its B scenario. For an A rating scenario, Morningstar assumes the HPI in these
regions will experience their worst recorded percentage decline. The worst historical regional HPI decline is measured by the steepest peak-to-trough HPI
percentage decline experienced during any housing cycle in the available data set. Regional HPI data typically dates back to the 1970s at the MSA level. For
attached property types (townhomes, condominiums, duplexes), Morningstar assumes 110% of the worst-recorded percentage decline. The weighted average
percentage HPI decline applied to this portfolio for an A scenario was 39.2%. For a security to survive an AAA scenario, it would need to pass a more severe HPI
stress. Morningstar assumes a 1.3x multiple of the A HPI curve in the AAA scenario. The assumed HPI decline at the AAA level resulted in a decline of 51.0% for
this portfolio. A summary of HPI stresses at each rating scenario and a comparison to the HPI stresses of previous single-family rental transactions can be seen
below. Further, if Morningstar perceives the recent HPI increase in a region to be excessive and potentially volatile, Morningstar applies a cap to the HPI
increase, effectively lowering the cutoff date BPO value.
Table 3 - HPI Stress (%)
CSH 2016-1

HPA 2016-1

PRD 2015-SFR3

AH4R 2015-SFR2

IH 2015-SFR3

CAH 2015-1

PRD 2015-SFR2

AAA

51.0

45.5

48.3

40.2

52.4

55.0

49.5

AA

45.1

40.3

42.7

35.6

46.3

48.6

43.8

A

39.2

35.0

37.2

30.9

40.3

42.3

38.1

BBB

26.2

23.3

24.8

20.6

26.9

28.2

25.4

Source: Morningstar Credit Ratings, LLC

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 The CSH 2016-1 transaction features properties concentrated in some of the MSAs that experienced dramatic HPI declines in the recent housing downturn. The
table below highlights the top five MSAs of recent single-family rental issuance and displays their respective HPI declines in the AAA and A rating scenarios.
Morningstar uses the national HPI decline for those MSAs where the worst-recorded percentage decline is less than the worst national decline.
Table 4 - MSA HPI Decline (%)

Source: Morningstar Credit Ratings, LLC

The following charts stratify five single-family rental transactions by the percentage of the pool (based on BPO value) that experienced a house price index
decline as categorized below. The AAA and A rating scenarios are shown. As illustrated, 32.7% of the CSH 2016-1 pool was concentrated in a higher HPI stress
bucket of 60.1 and higher in the AAA scenario. In the A scenario, 55.3% of the pool was in the <40.1 stress bucket.
Chart 1 – Scenario HPI
AAA Scenario HPI Distribution

A Scenario HPI Distribution

Source: Morningstar Credit Ratings, LLC

Morningstar computed the direct capitalization value for each property by dividing the ratings-level Morningstar NCF by an MSA-level multifamily cap rate at
each rating stress, plus an additional 50 basis points. Based on regional multifamily cap rates from Real Estate Research Corp., the average base-case cap rate
applied was 6.9%. With the assumption that the investor bid for stabilized single-family properties is the market floor, Morningstar valued each of the properties
using the higher of the HPI stressed value and the value based on its direct capitalization method. More information on this approach can be found in
Morningstar’s published criteria. (For details, see the Ratings/Surveillance tab at https://ratingagency.morningstar.com.) The chart below shows how frequently
the HPI approach versus the cap rate approach resulted in a higher value at each rating scenario.

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 Chart 2 – Property Valuation
4,000
3,500

Property Count

3,000
2,500
2,000
1,500
1,000
500
AAA

AA
HPI Approach

A

BBB

Cap Rate Approach

Source: Morningstar Credit Ratings, LLC

Table 5 – Credit and Cash Flow Analysis
Size ($)

Morningstar Value ($)

Morningstar NCF ($)

Implied Cap
Rate (%)

Morningstar Market
Value Decline (%)

Payoff
Ratio

AAA

266,320,000

345,921,891

21,560,333

6.2

55.8

1.3

B

AA

58,747,000

383,363,201

21,806,737

5.7

51.1

1.2

C

A

46,997,000

422,745,003

22,053,141

5.2

46.0

1.1

D

BBB+

43,081,000

513,145,428

22,217,410

4.3

34.5

1.2

E

BBB

70,496,000

513,149,326

22,299,545

4.3

34.5

1.1

F

BBB-

23,499,000

513,155,150

22,521,308

4.4

34.5

1.0

G

NR

26,797,000

N/A

N/A

N/A

N/A

N/A

Tranche

Rating

A

Source: Morningstar Credit Ratings, LLC

Additionally, Morningstar visited the property manager CSH (formerly known as SWAY Management LLC, and the successor by merger to CAH Manager, LLC) in
its Scottsdale office in December 2015. Morningstar had a follow-up conference call in April 2016 to discuss the merger of Starwood Waypoint Residential Trust
and Colony American Homes, Inc. Upon completion of the review, Morningstar considered CSH an acceptable property manager. Morningstar also conducted
an onsite interview with Green River Capital, a is wholly owned by Clayton Holdings, LLC, a subsidiary of Radian Group Inc., which provided BPOs for the lender
JPMorgan Chase Bank, N.A. Morningstar’s operational risk assessments group maintains rankings and forecasts for GRC of MOR RV1/Stable as a residential
vendor for asset management, MOR RS1/Stable as a residential component servicer for loss mitigation, and MOR RV2/Stable as a residential vendor for singlefamily rental property-management and surveillance services. The ORA ranking and forecast for Midland Loan Services, which is acting as special servicer, is
MOR CS1/Stable. Midland is also acting as servicer and the ORA servicer ranking and forecast is MOR CS1/Stable. For the full assessment reports and
additional information, please see the Operational Risk Assessments tab at https://ratingagency.morningstar.com.
Morningstar will monitor the rating on each class of certificates on an issuer-paid basis, in accordance with Morningstar’s policies and procedures.
Given that the securitization of single-family rental properties is a new asset class, Morningstar considered the following concerns:

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CSH 2016-1

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


Limited Performance History: On the whole, single-family rental performance history is limited. For credit-rating purposes, performance data is
necessary to make informed assumptions about the future performance of single-family rental income and related expenses. Morningstar
incorporated four years of regional single-family rent history provided by RentRange in our analysis. Additionally, Morningstar reviewed rental
information for each property from third-party sources. Morningstar considered multifamily vacancy and cap rate data as a proxy, and made
conservative adjustments, as it deemed necessary. Furthermore, CSH and its predecessors have been in business for approximately 48 months and
does not have a history of operating through a complete business cycle. As the company establishes a performance track record, the lack of
operational history will eventually become less of a concern.
Property-Management Risks: The efficient management and maintenance of properties is an operational concern. Property-management economies
of scale are easier to achieve with multifamily rental properties than with single-family rental properties.
Geographic Dispersion: While a geographic distribution may be valuable from a diversification stand point, it poses problems from a propertymanagement perspective. As mentioned, the transaction’s underlying properties have been classified into 31 distinct MSAs based on Morningstar’s
ZIP code to MSA mapping.
Chart 3 – Regional Concentration

Atlanta, GA
15.2%

Tampa, FL
Las Vegas, NV

32.6%

Denver-Aurora, CO

8.6%

Dallas-Plano-Irving, TX
Charlotte, NC

7.7%

Fort Lauderdale, FL
Miami, FL

3.6%

7.4%
4.1%





Houston, TX

4.0%
5.2%

5.5%

Los Angeles, CA

6.1%

Other

Tenants: Traditionally, renters desire the flexibility intrinsic with the short-term nature of a lease. Defaulting on a lease results in a lower financial cost
and less credit damage than defaulting on a mortgage, so it may be easier for new tenants to simply walk away. Therefore, finding and retaining
creditworthy renters could be costly and difficult to forecast. Property managers need to demonstrate local knowledge of the rental market for each
property and have a strong track record of limiting renter turnover and vacancy. As of the cutoff date, 97.5% of the properties in the CSH 2016-1
portfolio were occupied and none of the properties were delinquent. All unoccupied properties have been previously leased. The CSH 2016-1
transaction includes 152 properties with tenants in place at the time of acquisition.
Rehabilitation and Maintenance Costs: Depending on the condition and location of the properties, repair costs and carry costs of properties can be
significant. Lengthy vacancy or lack of maintenance may result in substantial repair costs. Ongoing taxes, insurance, and maintenance costs must also
be considered. The upfront capital expenditure on average is 16.0% of the total prerehabilitation cost basis. The range of year built varies from 1907
through 2014. Roughly 42.0% of the properties were built from 2001 on. Generally, the older the property, the higher the initial capital expenditure.

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 Table 6 – Year Built
Year Built

<1951

Count

BPO Value ($)

BPO (%)

Average Monthly Rent ($)*

Average CapEx Costs ($)

57

20,191,800

2.6

1,893

5,531

1951-1960

115

28,985,200

3.7

1,510

6,175

1961-1970

149

33,058,350

4.2

1,473

5,857

68,970,915

8.8

1,391

4,951

124,212,050

15.9

1,476

4,377

1971-1980
1981-1990

345
589

1991-2000

768

178,552,732

22.8

1,579

3,098

2001-2010

1,299

280,811,116

35.9

1,507

1,899

244

48,509,600

6.2

1,497

1,081

3,566

783,291,763

100.0

1,510

3,167

2011-2014
Total

*Based on gross potential rent for vacant properties





Security Deposit: The property manager could use funds in the security deposit account to conduct certain maintenance and property repairs and
manage the eviction process, among other items. Additionally, a tenant might be more willing to exercise caution with a single-family rental property
depending on the amount of security deposit pledged. Based on Morningstar’s interviews with real estate agents, security deposits are generally
equal to or greater than one month’s rent. Security deposit amounts can vary by region and may be subject to regional market standards. For example,
landlord/tenant laws in Phoenix allow for a security deposit structure in which part of the deposit is allocated to nonrefundable fees. These
nonrefundable fees generally account for cleaning and administrative costs. This is a market-accepted practice in the Phoenix region, whereas most
other regions may collect a fully refundable security deposit.
Swimming Pools: A total of 293 of the properties in CSH 2016-1 have a swimming pool. While swimming pools could make a property more
attractive to certain renters and could generate a higher rental income, they can also be viewed as potential hazards and potentially add to landlord
liability.

Base-Case Credit and Cash Flow Assumptions
Rent Yields
Rent yield is an important metric that single-family rental investors consider when looking to buy properties. In this section, Morningstar shows the gross rental
yields associated with the CSH 2016-1 transaction (Exhibit 1) and compares the rental yields across major MSAs with selected prior transactions HPA 2016-1,
PRD 2015-SFR3, and AH4R 2015-SFR2 (Exhibit 2). Morningstar also shows the gross rental yield charts for CSH 2016-1 and HPA 2016-1 to highlight differences
among the MSA rental yields and geographic compositions (Exhibit 3). Morningstar discusses its preference for using net rental yields as a measuring yardstick
(Exhibit 4) and, finally, shows the result of the NCF adjustments on rental yields (Exhibit 5). For the following exhibits, Morningstar uses the gross potential rent,
which includes rent for vacant properties, if any.

Gross Rental Yields: Morningstar begins by calculating the gross rental yields for the CSH 2016-1 transaction at the MSA level. Gross yields are calculated
by dividing annual gross potential rent by the issuer-provided BPO values. The following exhibit compares gross rental yields across various MSAs.

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 Exhibit 1 – HPA 2016-1 Gross Rental Yields by MSA

Exhibit 2 – Gross Rental Yields Across Transactions

Gross Rental Yield= Annual Gross Potential Rent/Issuer BPO Value
The size of the bubble represents MSA concentration.

Gross Rental Yield= Annual Gross Potential Rent/Issuer BPO Value

Source: Morningstar Credit Ratings, LLC

Exhibit 3 – CSH 2016-1 and HPA 2016-1 Gross Rental Yields by MSA
Gross Rental Yield= Annual Gross Potential Rent/Issuer BPO Value
The size of the bubble represents MSA concentrations.

CSH 2016-1

HPA 2016-1

Source: Morningstar Credit Ratings, LLC

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 Net Rental Yields: Analysis of gross rental yields alone does not provide an accurate picture about the properties, as there are a number of expenses involved
and these expenses vary. Morningstar calculates net rental yields by making adjustments for vacancy rates, real estate taxes, property-management fees,
homeowners association expenses, insurance expenses, repairs and maintenance expenses, leasing and marketing expenses, and capital expenditures. Some of
these expenses can alter rental yields substantially. For example, in the CSH 2016-1 pool, the property tax adjustment for Atlanta is 1.2%, nearly two times
higher than the property tax in Denver-Aurora, which is 0.7%. As a result of higher property taxes and other expenses, the rental yield in Atlanta contracts 5.7%
as compared with 4.2% in Denver-Aurora (Exhibit 4).
Exhibit 4 – Rental Yield Adjustments in Atlanta versus Denver-Aurora
Gross Rental Yield= Annual Gross Potential Rent/Issuer BPO Value
Net Rental Yield= Morningstar BBB Annual NCF/Issuer BPO Value

Atlanta

Denver-Aurora

Source: Morningstar Credit Ratings, LLC

Given the cost differences among MSAs, investors usually apply a hurdle rate to their investment decisions. Investors may also vary the hurdle rates based on
their outlook on home price appreciation. For example, the hurdle rates might be lower in an MSA with better home price appreciation potential as investors
hope to achieve greater property appreciation in those MSAs. Morningstar recognizes the importance of these elements and subjects the aggregate NCF to a
variety of stresses in its Morningstar single-family rental subordination model. These adjustments are discussed in greater detail in the Morningstar Perspective
section of this presale. The following exhibit shows the net rental yields (after Morningstar’s NCF adjustments) across various MSAs after applying
Morningstar’s BBB rating stress assumptions.
Exhibit 5 – CSH 2016-1 Gross versus Net Rental Yields by MSAs
Gross Rental Yield= Annual Gross Potential Rent/Issuer BPO Value
Net Rental Yield= Morningstar Annual NCF/Issuer BPO Value

Source: Morningstar Credit Ratings, LLC

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CSH 2016-1

 Rental Income
Morningstar does not solely rely on the actual rent provided in the data tape. Instead, an assigned rent incorporating the actual rent, concession adjustments,
third-party rental data points, and a mortgage payment assumption was used. Concessions are defined as a reduction in market rent. Third-party rental
estimates used in the analysis of this pool include RentRange and other sources of data. For RentRange and other data sources, property-level rent estimates
were used. The mortgage payment approach estimates the monthly mortgage commitment a residential homebuyer might experience if purchasing the property
(see the Mortgage Approach section below for more detail). If the average of the third-party data points and the mortgage approach were less than the actual
rent minus concession adjustments, Morningstar used an average of the mortgage approach, third-party data points, and rent minus concessions. If rent minus
concessions was less, Morningstar used the actual rent minus the concession adjustment. In other words, in determining Morningstar’s rental income, the
actual rent was at least lowered by a concession assumption. Morningstar’s annual assigned rent for this pool is $62.8 million compared with the issuer
reported gross potential rent of $64.6 million.

Mortgage Approach
This approach is designed to evaluate the buy or rent decision of a prospective tenant. In estimating the monthly mortgage obligation, Morningstar assumed a
100% loan-to-value ratio, a 6.5% fixed interest rate, and a 30-year term. Morningstar used a 100% LTV because the buy versus rent decision would involve
financing the entire property. Assuming a 30-year fixed rate of 4.0%, and a historical spread between prime and subprime rates of 250 basis points, Morningstar
set the interest rate at 6.5%. The total monthly mortgage payment also includes estimates for maintenance, capital expenditures, taxes, and insurance.

Other Income
Morningstar gave no credit to other income. Other income includes items, such as pet fees, parking fees, and late fees. The ongoing nature of this income is
difficult to predict, and there was not enough data to reliably give credit for this income. The issuer underwrote no other income for this pool.

Vacancy
Vacancy data in the single-family rental space is relatively limited. Morningstar reviewed data from Reis, the U.S. Census Bureau, available SEC registration
statement filings, and RentRange to research the availability of single-family rental vacancy percentages. Because robust single-family rental RentRange
vacancy data was not available, Morningstar primarily relied on multifamily Reis data as a proxy for single-family rental vacancies and added an uncertainty
adjustment. The Reis analysis showed an average multifamily vacancy for this pool’s geographic concentration of about 6.0%. U.S. Census Bureau data is based
on only a sampling of households. It may not be based on a homogenous set of properties and may not be professionally managed. Morningstar interviewed
local real estate agents in several of the regions represented in the pool. See Real Estate Agent Interviews section below. In general, vacancy is currently
considered low in the single-family rental market. Considering the above-mentioned data points, Morningstar applied a vacancy rate of 9.0% plus a qualitative
adjustment that brought the vacancy rate to 10.3% of gross income ($6.5 million), which is more conservative than the underwritten economic vacancy rate of
7.1% of issuer gross income ($4.6 million).
Morningstar applies qualitative adjustments to account for structural and documentation weakness in the transaction. The loan agreement lacks credit
measures such as the income/rent ratio in the eligible tenant provision. Morningstar accounts for this potential impact by reducing the Morningstar gross rent
by 1.0%. Morningstar also accounts for the 129 month-to-month tenants and 152 carry-over tenants by further stressing the vacancy assumption, bringing the
Morningstar vacancy rate to 10.3%.

Renewal Rate
As verified by interviews with real estate agents, higher renewal rates are expected for single-family rental properties relative to multifamily properties. Singlefamily rental tenants generally prefer staying in their desired neighborhood and community. Moving from a house may be more difficult than moving from an
apartment. Often, staying in the same school district is an important consideration for tenants in single-family rental properties. The underwritten renewal rate
is 66.6%. The renewal rate is used as a factor in determining the underwritten maintenance turnover costs and the leasing and marketing costs. Based on the
anecdotal evidence from conversations with local realtors, the historical performance of other single-family property managers, Morningstar assumes a 60%
renewal rate in the relevant analysis.

Taxes
Morningstar assumes an increase in taxes per property. This results in annual real estate taxes of $10.9 million in the Morningstar model as compared with
$10.5 million from estimated real estate taxes underwritten by CSH.
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 Property-Management Fee
Morningstar used a property-management fee equal to 8.0% of the projected gross income, or $5.0 million, which is the underwritten property-management fee
percentage. CSH underwrote the property-management fee at 5.6% of the rental income ($3.6 million).

HOA Expense
Morningstar relied on the underwritten HOA fees. The annual HOA expense totaled approximately $1.1 million, or 1.7% of gross income. The borrower
represents that that there are no delinquent HOA fees on any of the properties as of the cutoff date.

Insurance Expense
Morningstar assumes an increase to the provided property-level insurance expenses. This results in an annual insurance expense of approximately $1.1 million,
or 1.7% of gross income. CSH underwrote this expense at approximately $1.0 million, or 1.6% of gross income.

Repairs and Maintenance and Other Costs
Morningstar adds a 10.0% stress to the underwritten property-level repairs and maintenance expenses. The Morningstar underwritten amount with the
additional 10.0% buffer results in $4.0 million in annual expenses (6.4% of gross income). CSH underwrote $3.6 million (5.6% of gross income).

Leasing and Marketing/Turnover Costs
Morningstar adds a 28% stress to the underwritten property-level leasing and marketing/turnover expenses. The underwritten amount with the additional 28%
buffer results in $5.4 million in annual expenses (8.5% of gross income). This compares to the underwritten amount of $4.2 million (6.5% of gross income).

Capital Expenditure Reserves
The issuer underwrote $960 per property in annual capital expenditure reserves. Morningstar assumes a baseline capital expenditure of $1,000 per property.
Morningstar increases the capital expenditure for those properties built before 2013 with upfront rehabilitation costs below $2,000. For these nonrehabilitated
properties, if the property value is less than $75,000, Morningstar uses a capital expenditure of $1,500; if the value is greater than $75,000 but less than
$100,000, Morningstar uses a capital expenditure of $2,000; if the value is greater than $100,000 but less than $300,000, Morningstar uses a capital expenditure
of $2,500; if the value is greater than $300,000, Morningstar uses a capital expenditure of $3,000. In total, Morningstar’s underwritten capital expenditures
amount to an average of $1,106 per property before an additional 10% buffer and $1,216 after the 10% buffer. This results in $4.3 million in annual expenses
(6.9% of gross income) which is compared with the issuer underwritten $3.4 million (or 5.3% of gross income).

Cap Rate
Morningstar’s single-family rental cap rate assumptions are based on the MSA-level Morningstar multifamily cap rates. At the property-level, a buffer of 50
basis points is added to the multifamily levels to account for the uncertainty of single-family rental performance as compared with multifamily performance. A
cap rate floor of 6% is set. Cap rates are also stressed at the ratings level. The ratings-level cap rate increases are anchored at AAA (275 basis points), AA (225
basis points), A (200 basis points), and BBB (150 basis points). The cap rate increase is smoothed out between these anchor points to account for rating notches.

Net Cash Flow
Morningstar’s single-family rental NCF stresses are based on ratings-level Morningstar multifamily NCF stresses. The single-family rental analysis adds 50 basis
points to the multifamily levels to account for the uncertainty of single-family rental performance as compared with multifamily performance. The NCF stress is
anchored at AAA (12.5%), AA (11.5%), A (10.5%), and BBB (9.5%). The NCF stress is smoothed out between these anchor points to account for rating notches.

Property Valuation
Morningstar’s single-family rental analysis of HPI is based on its single-family HPI approach with applicable stresses applied to the property-level BPO. The
analysis starts by determining the worst historical peak-to-trough decline at the MSA level during any housing cycle in the available data set. Regional HPI data
typically dates back to the 1970s at the MSA level. In an A scenario, Morningstar assumes the HPI in these regions will experience their worst-recorded
percentage decline. For attached property type, Morningstar assumes 110% of the worst-recorded percentage decline. There were no properties designated as
townhome, condo, or two- to four-family in the current pool. Morningstar generally applies an additional 10% HPI stress on non-single-family detached

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CSH 2016-1

 properties to account for HPI volatility. The AAA scenario is more severe, and so an HPI multiple of 1.3x the A level is applied. The B scenario assumes no HPI
appreciation. The HPI declines between the AAA, A, and B anchor points are then interpolated.
The weighted average percentage HPI declines applied to this portfolio at each rating anchor point are as follows: AAA (51.0%), AA (45.1%), A (39.2%), and BBB
(26.2%), as shown in Table 3.
Morningstar applied a stress to the BPOs because, in general, a valuation based on a BPO may be less comprehensive than a valuation based on a full appraisal.
However, Morningstar gained comfort from the BPO process applied by GRC. Therefore, Morningstar applied a qualitative adjustment recognizing GRC’s
assessment of BPOs. Morningstar has more certainty of the BPO values because of GRC’s operations and BPO process. Given GRC’s above-average ranking and
its BPO diligence process, Morningstar determined that there is more stability in the BPO value provided by GRC, which warrants a reduction of our HPI stress in
these values.
Table 7 – HPI Stress (%)
HPI Stress

With GRC Qualitative Adjustment

Without GRC Qualitative Adjustment

Reduction

AAA

51.0

53.7

2.7

AA

45.1

47.5

2.4

A

39.2

41.3

2.1

BBB

26.2

27.5

1.3

Source: Morningstar Credit Ratings, LLC

Please see the section Third-Party Property Review on Page 30 for more detail on GRC.
Additionally, the direct capitalization value for each property was computed by dividing the Morningstar NCF by an MSA-level multifamily cap rate, plus an
additional 50 basis points. Morningstar valued each of the properties using the higher of the HPI stressed value and the value based on its direct capitalization
method.

Property Manager and Servicer Summary
Property-Manager Review
Colony Starwood Homes was created on Jan. 5, 2016, through the merger of Starwood Waypoint Residential Trust and Colony American Homes, Inc. CSH
acquires, renovates, leases, maintains, and manages single family residential rental homes. As of April 30, 2016, CSH employs approximately 620 people across
acquisitions, renovations, marketing, leasing, administrative, financial, and property-management functions. The company was established as a Delaware
corporation and selected to be structured as a REIT for tax purposes. As of March 31, 2016, CSH owned approximately 31,000 homes in 13 primary markets and
managed through 24 area offices.
 Management Tenure – CSH is led by an experienced senior management team averaging approximately 18 years of relevant industry experience.
 Tenant Underwriting – CSH has developed a rules-based tenant underwriting process that includes credit review, criminal background check, Office
of Foreign Assets Control review, eviction checks, and income verification. Resident screening criteria includes:
o Credit report detail and VantageScore collected from one of the three primary credit bureaus (Experian, Equifax, and TransUnion)
o Rental history screening via Experian RentBureau data
o National eviction check; previous evictions result in an automatic rejection
o National criminal background check, including National Sex Offender Registry. Applications from sex offenders and those with felony
convictions are automatically rejected.
 Rent Collection – Approximately 80% of rent payments are received through CSH’s web portal and processed through Yardi PAYscan. Tenants may
also make rent payments through the mail or at a CSH office with a personal check, money order, or cashier’s check. Per the policies and procedures,
CSH will not accept cash for the rent payment.

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





Tenant Relationship Management and Asset Management – As of March 31, 2016, CSH had an overall occupancy rate of 95.0% and a same store
occupancy of 95.8%. Tenant renewal rates are approximately 73% with renewal rent growth averaging 4.9%. CSH actively manages the portfolio’s
leases based on market conditions and portfolio performance to achieve maximum rental revenue. This includes proactively managing lease terms and
lease expiration dates to minimize vacancy times in the portfolio. During 2015, CSH reduced the turn time on portfolio properties to 14 days from 21
days. In the first quarter, same store turnover expense per property was $472 annually. Management represents that these improvements are due to
active management of lease expiration dates and more efficient chargebacks of lease-end damages to the resident.
Acquisitions – CSH has developed an acquisitions platform based on the following objectives:
o Target markets that offer attractive growth potential
o Build a diversified nationwide portfolio with density in core markets to create economies of scale
o Select high-quality neighborhoods and assets
 Strong school districts
 Low crime areas
 Proximity to transportation corridors and employment centers
 Family friendly configurations (three+ bedroom, two+ bathroom, garage, etc.)
 Strong gross rental revenue metrics
 Property-level underwriting with market specific criteria
 Proximity to other portfolio assets
o Identify opportunistic property/portfolio acquisition candidates through multiple sourcing channels
o Focus on established acquisition strategy while also prepare for industry consolidation opportunities
Geographic Diversification and Market Concentration – CSH is operating in 13 primary markets. As of March 31, 2016, the largest market by
property count was Atlanta with 5,659 properties, accounting for 18.6% of the CSH portfolio. The top four markets (Atlanta, Miami, Tampa, and
Southern California) make up 50.1% of the CSH portfolio. While creating a diversified geographic portfolio, CSH has also focused on building density
in its core markets to create economies of scale. As of March 31, 2016, CSH owned an average of approximately 2,700 in its core markets. Part of the
company’s growth strategy is to continue acquiring properties and build scale in lower-density markets to help improve operating efficiencies.
Property Management – CSH has developed comprehensive policies and procedures to provide a consistent structure around the company’s
operations. CSH continually evaluates the contents of the policies and procedures and updates any legal requirements or necessary changes in
operating procedures. The policies and procedures reflect the ownership, mission statement, goals, and objectives for CSH. CSH, as part of the
policies and procedures, has detailed instructions to comply with various regulatory requirements, including, but not limited to:
o Fair Housing
o Americans with Disabilities Act
o Antitrust
o Real Estate Settlement and Procedures Act, or RESPA
o Environmental Protection Agency, or EPA
o Red Flags Rule, as required by the Federal Trade Commission
o Residential Lead-Based Paint Reduction Act, or RLPHRA
o Uniform Regulations of Landlord Tenant, or URLTA
o Servicemembers’ Civil Relief Act of 2003, or SCRA
o Federal Communications Commission, of FCC
o Fair Credit Reporting Act, or FCRA
o Equal Credit Opportunity Act, or ECOA
o Fair and Accurate Credit Transactions Act, or FACTA
o Can-Spam Act with the FTC
The policies and procedures are managed and continuously updated, which allows CSH to download and create consistent and comprehensive
policies and procedures. The CSH operational policies and procedures outlines property-management processes required of all branch personnel to
ensure consistent and compliant practices in all regions. There are also specific sections that define general repair requirements and product
standards, vacancies, applications, tenant move in, tenant notice to vacate, tenant move out, and tenant emergency guidelines that are to be followed
for all CSH managed properties. CSH operates 24 area offices serving the property portfolio with an average of 1,100 homes per office managed by a
team of 13-14 employees.

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


Information Technology – CSH uses Yardi Voyager and Yardi PAYscan for property management and invoice/payment processing. Some of the
services provided by Yardi include network security, hardware management, database management, and application change management. An annual
IT controls audit is completed by Deloitte, LLP to evaluate the system’s internal control design and effectiveness and an SSAE 16 report is obtained
from Yardi. Yardi updates the CSH database on a real time basis to a parallel database server with automatic failover capabilities. Incremental
transactional backups are made to allow for point-in-time database restores. Each night, complete backups are made and placed on a server for CSH
to download. CSH has developed a technology platform, Atlas, to manage properties from acquisition through disposition. Secure password
parameters are used as an authentication technique for financial applications, databases, and related operating systems. The password policy
requires a maximum password age of 90 days, minimum password length, password complexity, and locking an account after a minimum number of
failed login attempts.
Disaster Recovery and Business Continuity – CSH represented there is a disaster recovery and business continuity plan in place, however,
Morningstar did not receive nor review a copy of the plan.
Operational History – CSH has been in business for approximately 48 months and does not have a history of operating through a complete business
cycle. As the company establishes a performance track record, the lack of operational history will become less of a concern.

Servicer and Special Servicer Review
Midland Loan Services, a division of PNC Bank, N.A., is acting as servicer and special servicer. In July 2015, Morningstar affirmed its MOR CS1 commercial
mortgage primary-, master-, and special-servicer rankings for Midland Loan Services. Morningstar’s forecast for all three rankings is Stable.
Morningstar affirmed its primary- and master-servicer rankings based on Midland’s investor-reporting experience with commercial mortgage-backed securities
transactions and other investor types, proactive asset administration, excellent technology, and internal audit program. The primary- and master-servicer
rankings also consider Midland’s efforts to enhance training for associate-level employees and better coordinate job-function transitions resulting from
interdepartmental transfers. The affirmed special-servicer ranking recognizes Midland’s experienced staff, diligent asset-management practices, and successful
asset-resolution performance in 2014.
For the full Midland assessment report, please see the Operational Risk Assessments tab at https://ratingagency.morningstar.com. To summarize, the affirmed
rankings reflect Morningstar’s assessment of Midland’s operational infrastructure and portfolio-administration capabilities. In particular, the affirmed rankings
are based on the following composite factors:
Primary and Master Servicing
 Depth of experience as a primary/master servicer
 Operational stability
 Diverse servicing portfolio
 Highly automated technology platform
 Efforts to improve upon training and transitioning of tasks for associate level employees
 In-depth monitoring of collateral performance
 Master-servicing oversight
Special Servicing
 Well-controlled conflicts-of-interest management
 Extended asset-resolution achievement record
As of Dec. 31, 2014, Midland’s primary- and master-servicing portfolio, inclusive of shared servicing, consisted of 29,010 loans with an aggregate unpaid
principal balance of approximately $326.6 billion. Midland was the master servicer on 83 CMBS transactions, the primary and master servicer on 168 CMBS
transactions, and the special servicer on 331 securitized transactions. Midland’s entire CMBS portfolio consisted of 9,336 loans with an aggregate UPB of $120.7
billion. Additionally, as of Dec. 31, 2014, Midland was the named master servicer on 13 single-family rental securitizations collateralized by 50,665 single-family
rental properties with an aggregate UPB of $7.2 billion and was named the special servicer on five single-family rental securitizations collateralized by 23,183
single-family rental properties with an aggregate UPB of $2.80 billion.

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20

CSH 2016-1

 Midland also has experience in the single-family residential space through resources within PNC and through its asset-resolution team and structured-products
group. Morningstar analysts interviewed senior management at Midland to learn how the company might handle the special servicing of single-family rental
properties. In an event of default with the transferring of assets to special servicing, Midland expects to leverage resources from its ART and SPG units. One of
Midland’s strengths is in identifying third-party vendors to support the special servicing of single-family residential assets. Potential vendor services include
property site inspections, valuation, property management/leasing, receivership, legal, restructuring advisory, loan sales advisory, and property sales
brokerage/auction services. The company has been interviewed vendors in the geographic regions represented in the pool. Midland communicated that there
are no potential conflicts of interest with affiliated service providers or vendors. In determining potential solutions within special servicing, Midland will focus on
maximizing net recovery, expediting a resolution, and minimizing costs. The company recognizes the importance of evaluating all resolution strategies, including
modifying the loans, forbearance, note sales or taking over the assets for foreclosure and REO. Midland will produce a detailed asset summary and collateral
analysis to identify and evaluate resolution strategies. For the full assessment reports and additional information, please see the Operational Risk Assessments
tab at https://ratingagency.morningstar.com.

Real Estate Agent Interviews
Morningstar conducted interviews with local real estate agents in several of the major regions represented in the pool. The purpose of these calls was to learn
about local market dynamics, as seen by the realtors that have experience in the single-family rental space. Real estate agents commented on supply and
demand in their single-family rental markets and discussed how it compares with their knowledge of supply and demand in the multifamily market. They
provided their views on local market conditions, including pricing, vacancy, renewal rates, and the local economy. They also gave their insight on the profile of
single-family rental tenants and what tenants look for in single-family rental properties. These interviews provided a valuable tool in understanding the entire
single-family rental process, from property sale, to rehabilitation and conversion into a rental property, to the rental of that unit to a qualified tenant.
Common themes emerged from these interviews. The agents generally believed that there continued to be large investor demand for single-family rental
properties and noted that inventories are tight. However, in some regions, the typical investor profile has shifted slightly from large institutional players to
smaller buyers, including groups of realtors, regional companies, and so-called mom-and-pop investors. Tenant demand for single-family rental units is still
strong, and rental concessions are rarely available to prospective tenants. New tenants typically move into a property within four weeks of the property
becoming vacant. Rental rates and property values have generally been increasing across markets commonly seen in single-family rental transactions.
Nevertheless, one source of concern for property values is anticipating what happens if the investor bid were to evaporate. The agents noted that vacancy rates
between single-family rental and multifamily are comparable, although this could depend on local market forces. Single-family rental tenants are typically
former homeowners who often have families and ties to the neighborhoods, including a preference for the local school district. Demand has also been seen
from those who are hesitant to buy in the wake of the recent financial crisis, particularly from younger families. Agents expected that the renewal rates for
single-family rental units would be higher than those for multifamily properties. Morningstar, which began these interviews in 2013, has conducted interviews
annually since then.

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21

CSH 2016-1

 Property Summary
Geographic Composition
Table 8 – State Concentration
State

Count

BPO Value ($)

BPO (%)

Florida

968

226,547,358

28.9

Georgia

712

122,597,399

15.7

Texas

538

101,202,500

12.9

California

235

84,965,050

10.8

Colorado

336

81,947,833

10.5

North Carolina

302

70,928,475

9.1

Nevada

273

60,519,648

7.7

Arizona

202

34,583,500

4.4

3,566

783,291,763

100.0

Total

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CSH 2016-1

 Table 9 – MSA Concentration
MSA

Atlanta, GA
Tampa, FL
Las Vegas, NV
Denver-Aurora, CO
Dallas-Plano-Irving, TX
Charlotte, NC
Fort Lauderdale, FL
Miami, FL
Houston, TX
Los Angeles, CA
Raleigh-Cary, NC
Orlando, FL
Phoenix, AZ
Colorado Springs, CO
Fort Worth-Arlington, TX
Sarasota-Bradenton-Venice, FL
Riverside-San Bernardino, CA
Lakeland, FL
Port St. Lucie, FL
Sacramento, CA
Tucson, AZ
San Diego, CA
Vallejo-Fairfield, CA
Orange County, CA
Palm Bay-Melbourne-Titusville, FL
Ventura County, CA
West Palm Beach, FL
Oakland, CA
Gainesville, GA
Greeley, CO
Deltona-Daytona Beach-Ormond Beach, FL
Total

ratingagency.morningstar.com

Count

BPO Value ($)

BPO (%)

694
318
273
208
245
183
122
110
193
68
119
123
135
124
100
64
60
99
85
47
67
21
13
8
28
8
12
10
18
4
7
3,566

119,421,699
67,615,125
60,519,648
57,593,700
47,994,500
42,815,300
40,459,733
31,767,800
31,398,000
28,504,800
28,113,175
26,622,100
23,581,300
23,300,133
21,810,000
18,738,000
18,479,200
16,415,000
15,935,500
12,036,850
11,002,200
8,715,000
4,959,200
4,396,900
4,026,900
4,017,000
3,935,000
3,856,100
3,175,700
1,054,000
1,032,200
783,291,763

15.2
8.6
7.7
7.4
6.1
5.5
5.2
4.1
4.0
3.6
3.6
3.4
3.0
3.0
2.8
2.4
2.4
2.1
2.0
1.5
1.4
1.1
0.6
0.6
0.5
0.5
0.5
0.5
0.4
0.1
0.1
100.0

23

CSH 2016-1

 Property Composition
Table 10 – Number of Bedrooms
Number of Bedrooms

Count

BPO Value ($)

BPO (%)

2

93

21,742,708

2.8

3

1,937

379,478,547

48.4

4

1,230

296,165,458

37.8

5

286

78,721,250

10.1

6

19

6,748,800

0.9

7

1

435,000

0.1

3,566

783,291,763

100.0

Count

BPO Value ($)

BPO (%)

0-5,000

563

108,771,998

13.9

5,001-10,000

320

63,003,500

8.0

10,001-15,000

293

63,731,950

8.1

15,001-20,000

359

73,646,366

9.4

20,001-25,000

418

93,608,467

12.0

25,001-30,000

400

88,462,367

11.3

30,001-35,000

319

68,070,215

8.7

35,001-40,000

250

55,548,433

7.1

40,001-45,000

192

46,454,300

5.9

45,001-50,000

130

30,848,800

3.9

>50,000

322

91,145,367

11.6

3,566

783,291,763

100.0

Total
Table 11 – Rehabilitation Costs
Range of Rehabilitation Costs ($)

Total

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CSH 2016-1

 Table 12 – Rehabilitation Cost by MSA
MSA

Ventura County, CA
Orange County, CA
Oakland, CA
Los Angeles, CA
Fort Lauderdale, FL
Palm Bay-Melbourne-Titusville, FL
Miami, FL
Orlando, FL
Gainesville, GA
Tampa, FL
Vallejo-Fairfield, CA
San Diego, CA
Sarasota-Bradenton-Venice, FL
Deltona-Daytona Beach-Ormond Beach, FL
West Palm Beach, FL
Port St. Lucie, FL
Denver-Aurora, CO
Lakeland, FL
Colorado Springs, CO
Atlanta, GA
Charlotte, NC
Riverside-San Bernardino, CA
Fort Worth-Arlington, TX
Dallas-Plano-Irving, TX
Raleigh-Cary, NC
Greeley, CO
Tucson, AZ
Phoenix, AZ
Las Vegas, NV
Sacramento, CA
Houston, TX
Total

Count

Average Year
Built

Average Rehab
Cost ($)

Average Purchase
Price ($)

Average BPO
Value ($)

Average Rent ($)

8
8
10
68
122
28
110
123
18
318
13
21
64
7
12
85
208
99
124
694
183
60
100
245
119
4
67
135
273
47
193
3,566

1968
1957
1960
1953
1983
1979
1992
1991
1994
1995
1973
1968
1997
1990
1989
2003
1984
2001
1983
1995
2003
1993
1997
1992
2006
1996
1999
1984
2000
1978
2007
1993

47,182
47,044
46,735
43,910
43,032
43,010
42,891
37,771
37,528
37,270
37,245
35,973
35,121
33,830
32,773
29,348
27,916
27,291
27,085
25,191
22,368
22,178
20,839
16,926
16,371
15,629
11,477
10,920
10,359
7,275
3,441
24,749

317,750
357,750
192,386
268,537
229,081
72,431
199,409
145,301
96,690
136,114
225,457
288,176
190,136
83,100
227,292
131,053
183,261
127,986
131,333
105,682
190,695
195,855
171,449
160,422
206,159
183,612
134,889
107,333
178,037
190,270
126,981
154,335

502,125
549,613
385,610
419,188
331,637
143,818
288,798
216,440
176,428
212,626
381,477
415,000
292,781
147,457
327,917
187,476
276,893
165,808
187,904
172,077
233,963
307,987
218,100
195,896
236,245
263,500
164,212
174,676
221,684
256,103
162,684
219,656

2,491
2,376
1,904
2,212
2,309
1,139
2,085
1,539
1,134
1,526
1,983
2,088
1,866
1,143
2,173
1,411
1,717
1,238
1,267
1,258
1,642
1,706
1,740
1,575
1,691
1,608
1,116
1,033
1,327
1,395
1,421
1,510

*Based on gross potential rent for vacant properties

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25

CSH 2016-1

 Tenant Summary
Monthly Rent Analysis
Table 13 – Monthly Rent
Range of Monthly Rent ($)*

Count

BPO Value ($)

BPO (%)

<1,000.01

299

38,193,800

4.9

1,000.01-1,250.00

803

122,321,607

15.6

1,250.01-1,500.00

965

180,133,900

23.0

1,500.01-1,750.00

617

143,343,282

18.3

1,750.01-2,000.00

361

101,224,415

12.9

2,000.01-2,250.00

229

75,222,392

9.6

2,250.01-2,500.00

145

56,527,767

7.2

2,500.01-2,750.00

85

35,164,400

4.5

2,750.01-3,000.00

38

18,433,200

2.4

3,000.01-3,250.00

17

8,733,000

1.1

3,250.01-3,500.00

2

1,039,000

0.1

>3,500.00
Total

5

2,955,000

0.4

3,566

783,291,763

100.0

*Based on gross potential rent for vacant properties

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26

CSH 2016-1

 Table 14 – Rent by MSA*
MSA

Ventura County, CA
Orange County, CA
Fort Lauderdale, FL
Los Angeles, CA
West Palm Beach, FL
San Diego, CA
Miami, FL
Vallejo-Fairfield, CA
Oakland, CA
Sarasota-Bradenton-Venice, FL
Fort Worth-Arlington, TX
Denver-Aurora, CO
Riverside-San Bernardino, CA
Raleigh-Cary, NC
Charlotte, NC
Greeley, CO
Dallas-Plano-Irving, TX
Orlando, FL
Tampa, FL
Houston, TX
Port St. Lucie, FL
Sacramento, CA
Las Vegas, NV
Colorado Springs, CO
Atlanta, GA
Lakeland, FL
Gainesville, GA
Deltona-Daytona Beach-Ormond Beach, FL
Tucson, AZ
Palm Bay-Melbourne-Titusville, FL
Phoenix, AZ
Total

Count

Average Monthly Rent ($)

Average Original Lease Term
(in months)

Average Remaining Lease Term
(in months)

7
8
113
65
10
19
101
13
10
61
94
200
58
110
181
4
226
117
298
169
80
47
253
117
652
94
17
7
66
25
130
3,352

2,454
2,376
2,330
2,220
2,121
2,107
2,085
1,983
1,904
1,873
1,731
1,721
1,706
1,685
1,641
1,608
1,569
1,545
1,531
1,421
1,416
1,395
1,321
1,266
1,257
1,235
1,144
1,143
1,119
1,098
1,033
1,510

12.0
11.6
11.7
12.1
11.3
12.3
11.7
13.0
14.5
11.9
13.0
12.4
12.2
12.0
13.3
14.9
13.0
11.8
11.7
12.4
11.8
12.2
12.7
12.8
12.3
11.7
12.1
11.9
12.3
11.8
12.8
12.3

6.5
5.6
7.4
6.9
4.5
6.1
7.1
6.0
8.8
6.4
4.6
5.7
6.0
5.9
5.9
5.3
5.7
6.4
5.7
5.7
8.1
4.6
5.2
6.9
6.6
6.2
4.5
5.6
8.8
6.3
5.9
6.2

*Excludes vacant properties and month-to-month leases

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27

CSH 2016-1

 Lease Terms
Table 15 – Original Lease Terms
Range of Original Lease Term

Count

BPO Value ($)

BPO (%)

21

4,378,500

0.6

2,733

601,084,764

76.7

13-18

570

124,413,950

15.9

19-24

28

6,778,700

0.9

Vacant

85

19,799,699

2.5

MTM

129

26,836,150

3.4

Total

3,566

783,291,763

100.0

Range of Remaining Lease Term

Count

BPO Value ($)

BPO (%)

0-6

1,880

414,362,790

52.9

7-12

1,367

301,010,724

38.4

13-18

103

20,993,400

2.7

19-24

2

289,000

0.0

Vacant

85

19,799,699

2.5

MTM

129

26,836,150

3.4

Total

3,566

783,291,763

100.0

1-6
7-12

Table 16 – Remaining Lease Terms

Chart 4 – Current Lease Expiration (Percent by Count)
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%

Lease expirations are fairly flat throughout the year with slight peaks in the spring and early summer. This lease expiration profile means that monthly measures
of vacancy may increase around this time. By property count at cutoff, 3.6% of tenants were on month-to-month leases, none of the tenants were past due, and
2.4% of properties were vacant. It is expected that any delinquencies would be worked through as a normal course of business.
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CSH 2016-1

 Loan Features/Concerns
Loan Terms
A five-year floating-rate loan with an initial aggregate principal balance of $535,937,000 is divided into seven separate components, “Component A,”
“Component B,” “Component C,” “Component D,” “Component E,” “Component F,” and “Component G” evidenced by a single note. Each of the
components will correspond to one offered class of certificates.
Two years from the closing, the borrower may obtain three 12-month extensions of the term of the loan, beginning in July 2018, under the following primary
conditions:
(i)
No Event of Default (defined below) will have occurred and be continuing; and
(ii)
Borrower provides an extension interest rate cap agreement.
Each property has its corresponding allocated loan amount determined by the lender.

Accounts
The lender established a collection account, reserve account, and cash collateral account. The borrower established property accounts under a control
agreement with lender.

Scheduled Loan Amortization
The CSH 2016-1 transaction has no scheduled amortization.

Prepayment Protection
If a voluntary prepayment occurs within two years of closing, a spread maintenance premium is required.

Releases of Properties
Borrower may release an individual property or properties from the loan by prepaying 105%-120% of the allocated loan amount of the subject property or
properties depending on the aggregate amount of the mortgage loan prepaid. If a trigger period (defined below) is continuing, the excess of the net sales
proceeds of the sale of such property over the applicable release amount and any other amounts payable to the lender in connection with the release of the
allocated loan amount shall be deposited into the coverage account established by the lender.

Substitution of Properties
The borrower may elect to substitute a disqualified property with an eligible property rather than prepaying the loan. Substitute properties are subject to
multiple conditions.

Floating-Rate Loan/Interest-Rate Cap Agreement
The loan consisting of Components A–G has a floating interest rate based on Libor (could be converted to the Prime Rate). To mitigate the borrower’s exposure
to increases in LIBOR, the borrower entered into a rate cap agreement with a target Libor strike price for the loan period up to the initial maturity date. The
strike price for any replacement rate cap agreement will be a rate per annum equal to the interest rate at which the DSCR as of the immediately preceding
calendar date is note less than 1.2x. The interest rate cap agreement will have a notional amount equal to or greater than the principal balance of the mortgage
loan. Morningstar’s analysis assumed a maximum one-month Libor rate of 2.49%. Morningstar assumes the borrower will enter into a new cap contract at each
maturity and the strike rate of the interest-rate cap will be such that the DSCR is 1.2x. Morningstar’s rating assesses only the likelihood that the interest will be
paid up to the cap strike rate. If this assumption is not true, Morningstar’s ratings may be adversely affected. In addition, Morningstar's ratings do not take into
account any conversion between Libor and the prime rate or any payment delays, shortfalls, or other impact related to any conversion. Also, nonrenewal of the
cap contract may result in interest shortfalls to bondholders.

Debt Yield
Debt yield is a ratio of (a) annual underwritten NCF of the related properties to (b) the then outstanding principal amount of the loan.
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CSH 2016-1

 Trigger Period
A trigger period will begin when debt yield is less than 85% of the closing debt yield or an event of default occurs with respect to the loan.

Events of Default
The following would be considered events of default under the loan agreement: nonpayment of principal when due; nonpayment of interest, fees, or other
amounts after a grace period of two business days; bankruptcy events; a violation of covenants; prohibited transfers, liens, debt incurrence and affiliate
contracts; breach of the property representations and warranties or property covenants or failure to make required prepayments in respect thereof; failure to
pay taxes or maintain insurance; material inaccuracy of representations and warranties; inaccuracy of nonconsolidation opinion assumptions; loan
documentation ceasing to be in full force and effect or the loan parties or any other party so asserting; failure of perfection or priority in respect of a material
portion of loan collateral; change of control of the loan parties; certain material judgments; unauthorized assignments; and ERISA events (subject to customary
materiality and other qualifications and exceptions and cure periods).

Insurance
The properties are covered by property, casualty, liability, business interruption, windstorm, flood, earthquake, and other applicable insurance policies as and to
the extent, and in compliance with the applicable requirements of the loan agreement. The properties in this pool are or may be covered by blanket insurance
policies that also cover other properties of affiliates of the borrower. The borrower may use a $5 million aggregate deductible stop loss subject to a $25,000 per
occurrence deductible and a $25,000 maintenance deductible following the exhaustion of the above-mentioned aggregate amount. The loan documents also
require commercial general liability insurance on an “occurrence” basis with a combined limit of not less than $1 million per occurrence and $2 million in the
aggregate “per location” and overall $20 million in the aggregate. Further, the loan documents require umbrella and excess liability insurance in an amount not
less than $50 million per occurrence and in the aggregate.

Litigation
There are no actions, suits, or proceedings at law or in equity by or before any governmental authority or other entity now pending or, to the actual knowledge
of a responsible officer of a manager or any loan party, threatened, against or affecting any loan party or any manager, as applicable, which actions, suits or
proceedings (i) involve the loan agreement, the mortgage documents, the loan documents or the transactions contemplated thereby or (ii) if adversely
determined, would reasonably be expected to have a material adverse effect. There are no actions, suits, or proceedings at law or in equity by or before any
governmental authority or other entity that resulted in a judgment against any loan party that has not been paid in full that would otherwise constitute a loan
event of default.

Reserves
The borrower must fund the following reserve accounts with the lender that will be held as additional loan collateral:
 Property Tax Reserve;
 Insurance Reserve;
 HOA Reserve; and
 Capital Expenditures Reserve.

Third-Party Property Review
GRC is the due diligence provider for the Lender. Its scope of work is as follows:





Providing BPO values for each property;
Title review;
Lease review; and
Other diligence services.

GRC obtained BPOs through licensed real estate brokers/agents. A separate third-party was engaged to review and reconcile the BPOs obtained by GRC with
respect to 300 properties in the original pool of properties considered for this transaction. The typical data points included in the report represented information
on three comparable sales and three comparable active listings. Morningstar’s ORA group has assigned GRC rankings of MOR RV1/Stable as a residential

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30

CSH 2016-1

 vendor for asset management, MOR RS1/Stable as a residential component servicer for loss mitigation, and MOR RV2/Stable as a residential vendor for singlefamily rental property-management and surveillance services. (For access to the full report, please visit https://ratingagency.morningstar.com.) GRC periodically
ranks the performance of real estate agents within its network. In addition to the ORA review, Morningstar conducted an onsite interview with GRC in October
2015.

Property Covenants
CSH 2016-1 Borrower LLC, as borrower shall comply with property covenants. Breach of property covenants, if not cured, could trigger events of default.
Morningstar’s report on Representations, Warranties, and Enforcement Mechanisms for this transaction are available on its website,
https://ratingagency.morningstar.com and is incorporated herein by reference.

SPE and Bankruptcy Remoteness
The borrower is required under the loan documents and its organizational documents to maintain itself as a special purpose entity generally limited in its
activities to ownership and operation of the mortgaged properties. The loan documents and borrower’s organizational documents also include limitations on the
borrower’s ability to incur additional indebtedness and additional covenants regarding the borrower's separateness from other entities. While the borrower is
generally limited in incurring additional indebtedness, the loan allows for broader and/or higher thresholds of permitted debt than may be customary or
preferred for a transaction of this type and size. For example, the borrower is permitted to hold other indebtedness in the form of unsecured trade payables not
to exceed 3% of original principal amount of the loan to be paid within 30 days of incurrence. The borrower is also required to have independent managers
whose consent is required for certain bankruptcy matters. Although the loan documents and organizational documents require the borrower to comply with
certain covenants relating to the borrower’s separateness, and the borrower makes certain representations regarding its previous existence, the borrower
existed for a short time period prior to the origination of the loan. While pre-existing entities present a higher risk than newly formed special purpose entities, a
nonconsolidation opinion relating to the borrower was provided. While the special purpose entity borrower is intended to lessen the possibility that the
borrower’s financial condition would be adversely impacted by factors unrelated to the loan, there is no assurance that the borrower will not nonetheless
become part of a bankruptcy proceeding.

Cash Management
The borrower is required to establish the rent deposit account for the purpose of collecting rents. The rent deposit account is subject to a deposit account
control agreement and the borrower and the manager may make certain withdrawals from the rent deposit account until the occurrence of a loan event of
default, after which the lender may exercise control over the rent deposit account. The borrower must require tenants to pay rent directly into the rent deposit
account and generally must cause all rents received by the borrower or the manager to be deposited into the rent deposit account within three business days
after receipt.
All rents on deposit in the rent deposit account are to be deposited into the loan collection account every second business day (or more frequently in the
borrower’s discretion). Except as expressly provided in the loan agreement, the borrower will cause all receipts from the rate cap agreement to be paid directly
to the loan collection account. In addition, the borrower will (or will cause the manager to) deposit any other collections received by them into the loan
collection account or the rent deposit account within three business days of receipt; provided, insurance proceeds and condemnation proceeds are to be
handled in accordance with the relevant terms of the loan agreement; and further provided, that prior to any acceleration of the loan, borrower may cause the
rent deposit bank to retain a reasonable amount of funds in the rent deposit account with respect to anticipated overdrafts, charge-backs and bank fees and
any minimum balance required by the deposit account control agreement or account terms for the rent deposit account, not in excess of $100,000 in the
aggregate. The loan collection account will be subject to an account control agreement providing for the exclusive control of the account by the lender or the
servicer on its behalf and neither the borrower nor the manager will have any right of withdrawal therefrom.

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 Securitization Trust Summary
Structure
The CSH 2016-1 transaction uses a sequential pay structure. This structure provides credit enhancement in the form of subordinate classes.

Priority of Payments on Certificates
The priority of payments on the certificates generally follows a sequential-pay structure. The following is a brief synopsis of this priority.
(1) Interest distribution amounts to the Class A Certificates;
(2) Principal paydown of the Class A Certificates until paid in full, up to the principal distribution amount;
(3) Unreimbursed applied realized loss amounts to the Class A Certificates;
(4) Interest distribution amount to the Class B Certificates;
(5) Principal paydown of the Class B Certificates until paid in full, up to the principal distribution amount;
(6) Unreimbursed applied realized loss amounts to the Class B Certificates;
(7 Interest distribution amount to the Class C Certificates;
(8) Principal paydown of the Class C Certificates until paid in full, up to the principal distribution amount;
(9) Unreimbursed applied realized loss amounts to the Class C Certificates;
(10) Interest distribution amount to the Class D Certificates;
(11) Principal paydown of the Class D Certificates until paid in full, up to the principal distribution amount;
(12) Unreimbursed applied realized loss amounts to the Class D Certificates;
(13) Interest distribution amount to the Class E Certificates;
(14) Principal paydown of the Class E Certificates until paid in full, up to the principal distribution amount;
(15) Unreimbursed applied realized loss amounts to the Class E Certificates;
(16) Interest distribution amount to the Class F Certificates;
(17) Principal paydown of the Class F Certificates until paid in full, up to the principal distribution amount;
(18) Unreimbursed applied realized loss amounts to the Class F Certificates;
(19) Principal paydown of the Class G Certificates until paid in full, up to the principal distribution amount;
(20) Unreimbursed applied realized loss amounts to the Class G Certificates; and
(21) Any remaining amounts to the Class R Certificates.

Allocation of Realized Losses on Certificates
Losses on the certificates are generally allocated in a reverse sequential order:
(1) to the Class G Certificates,
(2) to the Class F Certificates,
(3) to the Class E Certificates,
(4) to the Class D Certificates,
(5) to the Class C Certificates,
(6) to the Class B Certificates; and
(7) to the Class A Certificates,
in each case until the certificate balance of each class is reduced to zero.

Rated Final Distribution Date
The rated final distribution date is the distribution date in July 2033. Morningstar’s ratings on the rated certificates address the likelihood of the timely receipt
by holders of such certificates of all payments of interest to which they are entitled on each distribution date and the ultimate receipt by such holders of all
payments of principal to which they are entitled on or before the applicable rated final distribution date.

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 Trust Structural Features/Concerns
Based solely on a review of the documents enumerated herein, the following reflect highlights of certain material trust structural features and/or concerns.

Directing Certificateholder/Controlling Class
This transaction uses the concept of a directing certificateholder. Prior to a control event, the directing certificateholder is the controlling class certificateholder
selected by a majority of the more subordinate of the Class E Certificates and the Class F Certificates with a then-outstanding certificate balance on such date
(as reduced by appraisal reductions) that is at least equal to 25% of the initial certificate balance of such class. Prior to a control event, the directing
certificateholder is afforded the right to direct the servicer and special servicer on various servicing matters and replacing the special servicer with or without
cause. A control event occurs when each of the Class E Certificates and the Class F Certificates have a then-outstanding certificate balance of (as reduced by
appraisal reductions) less than 25% of the initial certificate balance of such class.
For purposes of determining the directing certificateholder, exercising any rights of the controlling class or the consulting class or receiving asset status reports
or any other information under the trust and servicing agreement other than distribution date statements or supplemental reports, any holder of any interest in a
controlling class certificate or a consulting class certificate who is a relevant party or an affiliate thereof will not be deemed to be a holder of the related
controlling class or consulting class and will not be entitled to exercise such rights or receive such information. If, as a result of the preceding sentence, no
holder of controlling class certificates or consulting class certificates, as applicable, would be eligible to exercise such rights, there will be no controlling class or
consulting class, as applicable, or related directing certificateholder.
After the occurrence and during the continuance of a control event but prior to a consultation termination event, the directing certificateholder is the consulting
class certificateholder selected by a majority of the Class E Certificates with a then-outstanding certificate balance on such date (not reduced by appraisal
reductions) at least equal to 25% of the initial certificate balance of such class. The directing certificateholder is afforded the right to consult with the servicer
and special servicer on various servicing matters. A consultation termination event occurs when each of the Class E Certificates and the Class F Certificates have
a then-outstanding certificate balance of (not reduced by appraisal reductions) less than 25% of the initial certificate balance of such class.
After the occurrence of a consultation termination event, there will be no directing certificateholder and no party will be entitled to exercise any of the rights of
the directing certificateholder.

Replacement of Special Servicer
Prior to a control event, the directing certificateholder has the right to replace the special servicer. After a control event, a vote to replace the special servicer is
initiated upon the written direction of holders of the principal balance certificates evidencing at least 25% of the voting rights (as reduced by appraisal
reductions). Following such direction, the termination and replacement of the special servicer, among other things, requires a vote of at least 66-2/3% of a
certificateholder quorum (75% of the aggregate voting rights taking into account any appraisal reductions and realized losses) or at least 50% of the voting
rights of each class of certificates (as reduced by appraisal reductions and realized losses).

Limited Rating Agency Confirmation/Notice
Rating agency confirmation may not be required over certain material loan amendments, modifications, borrower requests and/or material amendments to the
trust and servicing agreement. In addition, notice of some changes or events may be provided to the rating agency after they are effectuated. Because the
rating agency’s knowledge of these various changes or events may be delayed, surveillance activities and any related rating adjustments may occur later than if
rating agency confirmation and/or prior notice of these changes or events was provided.

Repurchase Obligation
The loan seller may be required to repurchase the loan from the trust due to a material breach of a representation or warranty and the depositor may be
obligated to repurchase the loan as a result of a material document defect with respect to the documents delivered by the depositor. The obligations of the
depositor to repurchase the loan will be guaranteed by the arranger, acting in its capacity as the document defect repurchase guarantor. However, there is no
assurance that the holders of these repurchase obligations will have sufficient assets at the time to fulfill their obligations to repurchase the loan.

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 Conflicts of Interest
There are and/or may be various conflicts of interest among and between various parties to the transaction. However, the special servicer and servicer are
required to service the asset without regard to such conflicts. Morningstar’s analysis assumes the various parties comply with their duties.

Representations, Warranties and Enforcement Mechanisms
Morningstar’s report on the Representations, Warranties and Enforcement Mechanisms for this transaction is available on its website,
https://ratingagency.morningstar.com and is incorporated herein by reference.

Scope of Analysis
Morningstar used external legal counsel to perform a legal review of certain items in the transaction relevant to Morningstar's ratings analysis. In this
transaction, its external counsel solely reviewed the following materials available on the arranger website as of May 19, 2016 (except as otherwise specified in
this paragraph): (i) the May 18, 2016 posted draft offering circular, (ii) the May 11, 2016 posted draft trust and servicing agreement, (iii) the May 18, 2016
posted draft loan agreement and (iv) the May 9, 2016 posted draft of the loan purchase and sale agreement.
In addition, its external legal counsel intends to review the following documents upon posting of these documents on the arranger website prior to issuance of
the final ratings: (i) the limited liability company agreement of borrower, (ii) the opinion of Richards, Layton & Finger, P.A. regarding nonconsolidation, (iii) the
opinion of borrower’s and guarantor’s New York and Delaware counsel, (iv) true sale opinion(s) for the sale of the loan from the seller(s) to the depositor and
from the depositor to the securitization trust, (v) corporate and enforceability opinions of the servicer, special servicer, trustee, certificate administrator,
depositor and loan seller, and the general deal level opinion related to certain tax matters, (vi) the promissory note and (vii) versions of the documents
enumerated in the preceding paragraph posted as of the date of issuance of final ratings. Unless enumerated on the prior list, no external legal counsel review
was performed with respect to any documents. Therefore, leases, including ground leases and subleases, hedges and related documents, contribution and/or
allocation agreements, management agreements, estoppels, title reports, insurance contracts, environmental assessments, guarantees, indemnities, liens or
related searches, financial statements, rent rolls, surveys, financing statements, easement agreements, inter-creditor or subordination agreements (except as
expressly enumerated in the preceding paragraph), among others, were not reviewed by external legal counsel. As legal review of title policies was not
performed, Morningstar has assumed that these policies do not contain any judgments, tax liens, or other issues that would materially adversely affect any
borrower, property owner, property or the mortgagee's lien and security interest in any collateral for any loan. As legal review of local law opinions was not
performed, Morningstar has assumed that local law opinion(s) were provided for all relevant jurisdictions, on customary forms and with rating agency reliance.

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 Appendix A: Morningstar Single-Family Rental Subordination Model
This Appendix provides a brief description of Morningstar’s proprietary Single-Family Rental Subordination Model. Morningstar’s “Single-Family Rental
Securitization Ratings Criteria,” provides a more comprehensive overview of the model’s framework as well as details of the model’s main features. It can be found
on Morningstar’s website at https://ratingagency.morningstar.com, by going to the Ratings/Surveillance section of the website.
Overview
Morningstar uses its Single-Family Rental Subordination Model to determine the required credit enhancement levels of single-family rental transactions. In
addition to determining the initial enhancement levels, this model is an integral part of the ongoing surveillance of these transactions. This approach allows
Morningstar to maintain ratings consistency across single-family rental transactions throughout their lives.
The Single-Family Rental Subordination Model generates indicative credit support levels at each rating category for a portfolio of single-family rental properties
that back the single-family rental securities. Credit support levels are driven by the NCF generated by the monthly rental income for each property until the
Monetization Feature maturity date. This Monetization Feature is further described in Morningstar’s “Single-Family Rental Securitization Ratings Criteria”
available on the Ratings/Surveillance tab at https://ratingagency.morningstar.com. Upon maturity, the property liquidation values must be sufficient to cover
the unpaid portion of the single-family rental securities, thereby paying off all securitized tranches.
After the Morningstar base case NCF and payoff ratios are determined, they are then subjected to a set of stresses at each required rating category.
Each set of stresses include:
 NCF declines during the term of the securities and at the maturity date of the Monetization Feature that reflect worsening economic conditions;
 Cap rate increases that reflect deteriorating demand for single-family rental investment properties; and
 HPI declines to reflect the regional severity of a housing downturn.
During the term of the securities, the single-family rental subordination model evaluates whether there is sufficient NCF to make the required debt service
payments associated with the securitization. In other words, the DSCR needs to be adequate for each forecast period at each required rating scenario for the
related security to “pass” that rating scenario. The payoff ratio also needs to be deemed sufficient at the maturity date of the Monetization Feature at each
required rating scenario for the related security to "pass" that rating scenario.

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 Appendix B: Morningstar Rating Surveillance
Morningstar has been paid by the issuer to maintain surveillance on this transaction on a periodic basis. It will at a minimum publish its surveillance report for
this transaction on an annual basis on its website https://ratingagency.morningstar.com.
Morningstar's surveillance analysis is best described as a bottom-up approach. At its core, it is driven by the performance of the single-family rental properties
backing the loan. Analysts first evaluate the NCF and property values using qualitative and quantitative analysis, based on the applicable updated information.
The credit protections are then evaluated as part of Morningstar’s opinion of the risk profile of any given security. Morningstar applies its single-family rental
subordination model described at https://ratingagency.morningstar.com, to produce suggested credit ratings and rating outlooks for each class of a given
single-family rental transaction.
Any surveillance activities described herein are conditioned on Morningstar’s receipt of certain information to enable Morningstar to perform surveillance. The
degree of surveillance performed depends largely on the scope of review performed by Morningstar and enumerated in the related surveillance report and the
availability of information. The degree and scope of review and information considered is generally enumerated in the Morningstar surveillance report for the
respective transaction and should be considered when evaluating and comparing ratings.

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 Appendix C: Morningstar Rating Characteristics
The preliminary ratings provided in this report address the likelihood of the timely receipt of distributions of interest by certificateholders to which they are
entitled and, the ultimate distribution of principal by the Rated Final Distribution Date.
The preliminary ratings are based solely on the scope of review enumerated in this report and the information related thereto provided to Morningstar through
the arranger website or email as of the date hereof or as expressly enumerated herein which we believe to be reliable. Unless otherwise in accordance with
Morningstar’s policies and procedures, Morningstar does not audit or verify the truth or accuracy of any such information.
These preliminary ratings are not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by Morningstar. In
addition, these ratings do not address: (a) the likelihood, timing, or frequency of prepayments (both voluntary and involuntary) and its impact on interest
payments or the degree to which such prepayments might differ from those originally anticipated, (b) the possibility that a certificateholder might suffer a lower
than anticipated yield, (c) the likelihood of receipt of yield or spread maintenance charges, prepayment charges, yield or spread maintenance premiums or
penalties, yield maintenance default premiums, yield maintenance non-default premiums, prepayment premiums, spread maintenance payments, prepayment
fees or penalties, assumption fees, extension fees, modification fees, penalty charges, post-maturity interest shortfall distribution amount, default interest or
post-anticipated repayment date additional interest, excess interest or post-ARD interest, (d) the likelihood of experiencing prepayment interest shortfalls, an
assessment of whether or to what extent the interest payable on any class of rated certificates may be reduced in connection with any prepayment interest
shortfalls, post-maturity interest shortfalls or of receiving compensating interest payments or reimbursement of any prepayment interest shortfalls, (e) the tax
treatment of the certificates or effect of taxes on the payments received, (f) the likelihood or willingness of the parties to the respective documents to meet their
contractual obligations or the likelihood or willingness of any party or court to enforce or hold enforceable, the documents in whole or in part, (g) an assessment
of the yield to maturity that investors may experience, (h) the likelihood, timing or receipt of any payments of interest to the holders of the rated certificates
resulting from an increase in the interest rate on any underlying loan in connection with a loan modification, waiver or amendment, (i) excess interest or
additional interest amounts or any remaining or excess funds, (j) any CREFC license fee or similar amount(s), (k) any trust advisor fees, expenses or similar
amounts or (l) other non-credit risks, including, without limitation, market risks or liquidity.
Morningstar’s preliminary ratings take into consideration certain credit risks, and the extent to which the payment stream of the loan is adequate to make
payments required under the offered certificates based on information identified as subject to review herein and to the extent provided to Morningstar on
arranger’s website or through email for the transaction as of the date hereof. However, as noted above, the ratings do not represent an assessment of the
likelihood, timing or frequency of principal prepayments (both voluntary and involuntary) by the borrower, or the degree to which such prepayments might differ
from those originally anticipated. In general, the ratings address credit risk and not prepayment risk. In addition, the ratings do not represent an assessment of
the yield to maturity that investors may experience or the possibility that the certificateholders of the certificates might not fully recover their initial investment
in the event of delinquencies or defaults or rapid prepayments on the loan (including both voluntary and involuntary prepayments) or the application of any
realized losses. In the event that holders of such certificates do not fully recover their investment as a result of rapid principal prepayments on the loan, all
amounts “due” to such holders will nevertheless have been paid, and such result is consistent with the ratings assigned to such certificates.
While Morningstar may issue ratings solely on asset-backed securities, Morningstar does not (i) issue short-term ratings, or (ii) rate, assess or review corporate
entities, credit support providers, seller(s), guarantors, servicers, trustees, certain accounts or investments, insurers, liquidity providers, hedge providers or other
similar entities or items, unless consideration of a review and/or assessment is otherwise enumerated in Morningstar's presale report and/or surveillance
reports related to the transaction. Therefore, Morningstar's ratings and analysis do not take into consideration such characteristics of the transaction referenced
in clauses (i) and (ii) of the preceding sentence unless consideration of a review and/or assessment is otherwise enumerated in Morningstar's presale report
and/or surveillance reports related to the transaction. In addition, Morningstar's ratings and analysis do not take into consideration any potential or actual risk of
repudiation, receivership or other ramifications related to FDIC administration and/or enforcement of FDIC rights and remedies or similar banking regulations,
administration and/or enforcement, whether under U.S. or non-U.S. law, with respect to any entity involved in the transaction including a bank or subsidiary of
a bank. In addition, Morningstar's ratings do not take into consideration an assessment of the arranger(s), originator(s) and/or prior holder(s) of the loan(s)
included in the respective transaction. Additionally, for the avoidance of doubt, Morningstar does not rate obligors, managers or issuers. Further, the ratings do
not assess whether any exchange of certificates may occur or any delays or disruptions in payment due to such exchange or method of holding certificates.
As the ratings herein are preliminary ratings, such ratings may be subject to change during surveillance. As provided herein, surveillance analysis and ratings
will be publicly available and are being provided by Morningstar on an issuer- or arranger-paid basis.
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 In conjunction with evaluating any Morningstar ratings, please also see “Morningstar Definitions and Descriptions of Letter-Grade Credit Ratings, Rating
Outlooks, and Surveillance” at https://ratingagency.morningstar.com.

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