Bank of America Merrill Lynch Commercial Mortgage Trust 2016-UBS10 Annual Report: Your 2025 Performance Review

This annual report provides a clear, investor-friendly overview of the Bank of America Merrill Lynch Commercial Mortgage Trust 2016-UBS10. Consider this your essential guide to understanding the trust's performance during the fiscal year ending December 31, 2025. We've distilled complex financial details into plain language, highlighting its health, key developments, and implications for investors.

Business Overview: What Exactly Is This Investment?

The Bank of America Merrill Lynch Commercial Mortgage Trust 2016-UBS10 is not a traditional company; instead, it's a financial trust. This trust holds a portfolio of commercial mortgage loans, which are loans provided to owners of large income-generating properties such as shopping centers, office buildings, and hotels. Investing in this trust means you invest in the income these loans generate, making it a Commercial Mortgage-Backed Security (CMBS). Investors often choose CMBS for their potential for steady income and portfolio diversification.

Formed in 2016, the trust issued various classes of certificates, which represent ownership interests in its assets. Its main role is to collect principal and interest payments from the mortgage loans and then distribute these funds to certificate holders, after deducting fees and expenses.

Financial Performance: 2025 Performance Snapshot

The trust experienced a mix of stability and active management efforts this past year. Here are the key financial highlights:

• Current Pool Balance: As of December 31, 2025, the trust's total outstanding loan balance was approximately $785 million. This marks a healthy 23% principal reduction from its original $1.02 billion balance when the trust formed in 2016.
• Principal Paid Down in 2025: The trust paid down approximately $45 million in principal this year, primarily through scheduled amortization and a few loan payoffs.
• Interest Distributions: The trust made timely interest distributions to investors throughout 2025, reflecting steady cash flow from its performing loans.
• Delinquency Rate: The overall delinquency rate (loans 30+ days past due) remained relatively low at 2.8% by year-end, affecting 3 of the 55 remaining loans. This rate is slightly higher than 2.1% at the end of 2024, indicating some emerging pressures.
• Loans in Special Servicing: Currently, 5 loans, totaling approximately $85 million (about 10.8% of the current balance), are in special servicing. These loans face significant challenges, and their resolution is a primary focus for the trust's managers.
• Weighted Average Coupon (WAC): The remaining loans have an average interest rate of approximately 4.95%.
• Weighted Average Remaining Term (WART): The loans in the trust have an average of 3.5 years remaining until their maturity dates.

Overall, the trust demonstrated resilience. However, the increase in loans requiring special servicing highlights the need for continued vigilance in the current economic climate.

Management Discussion & Analysis (MD&A Highlights): The Key Players & Their Impact

Managing these loans is a complex task involving several specialized companies whose performance directly impacts the trust's health:

• Certificate Administrator (Wells Fargo Bank, National Association): Wells Fargo continues to manage all administrative tasks, ensuring accurate record-keeping and timely investor payments. Its operations remained smooth throughout the year.
• Servicers (Day-to-Day Managers):
  • Master Servicer Change: A significant development this year was the transition of the Master Servicer role. Wells Fargo Bank, National Association served in this capacity until March 1, 2025, when Trimont LLC seamlessly took over. This change, part of a broader industry trend towards specialized servicing, occurred without disrupting loan collections or investor distributions. Trimont LLC has since focused on operational efficiency.
  • Primary Servicers: Wells Fargo, Trimont, Midland Loan Services (a division of PNC Bank), and KeyBank National Association continue to handle daily collection and management for specific loans, maintaining strong collection rates on performing loans.
  • Special Servicers: When a loan faces serious trouble, a special servicer steps in. Rialto Capital Advisors, LLC, CWCapital Asset Management LLC, and LNR Partners, LLC actively manage the 5 distressed loans in the trust. Their strategies include loan modifications, forbearance agreements, and, in some cases, foreclosure or property sales, all aimed at maximizing recovery for the trust. This year, they successfully resolved one specially serviced loan through a discounted payoff, resulting in a 15% loss severity on that asset.
• Custodian (Wells Fargo Bank, National Association): Wells Fargo continues to securely hold all important loan documents.
• Trustees (Wells Fargo Bank, National Association and Wilmington Trust, National Association): These trustees oversee the trust, ensuring all parties adhere to the governing agreements.
• Operating Advisor (Park Bridge Lender Services LLC): Park Bridge Lender Services LLC provides expert advice, particularly on special servicing strategies, contributing to informed decision-making.

MD&A Highlights: The Loan Portfolio: What's Inside?

The trust currently holds 55 commercial mortgage loans secured by a diverse range of properties across the United States.

• Property Type Diversification:
  • Retail: 30%
  • Office: 25%
  • Hotel: 20%
  • Multifamily: 15%
  • Mixed-Use/Other: 10%
• Geographic Diversification: Loans are spread across 22 states, with the largest concentrations in California (18%), New York (12%), and Texas (9%). This geographic spread helps mitigate regional economic downturns.

Here is an update on some of the larger loans previously mentioned, reflecting their current status:

• Hyatt Regency Huntington Beach Resort & Spa (Original 6.8%): This loan, now approximately 6.5% of the current trust balance, remains a strong performer. The property maintained robust occupancy and revenue per available room (RevPAR) throughout 2025, with a Debt Service Coverage Ratio (DSCR) of 1.9x.
• 2100 Ross & Gateway Plaza (Original 7.7%): These two office properties, now collectively about 7.2% of the trust, are currently performing. However, they are closely monitored due to general headwinds in the office market, with occupancy slightly declining to 82% from 85% last year.
• 525 Seventh Avenue (Original 5.0%): This New York office property loan, now 4.8% of the trust, transferred to special servicing in Q3 2025. This transfer occurred because a major tenant vacated and the borrower faced refinancing challenges. The special servicer is currently negotiating a loan modification and exploring re-leasing strategies.
• Grove City Premium Outlets (Original 2.7%): This retail property loan, now 2.5% of the trust, continues to perform well, benefiting from strong consumer traffic and stable tenant sales.
• Twenty Ninth Street Retail (Original 4.0%): This retail loan, now 3.8% of the trust, is also performing, though it faces upcoming lease expirations that the servicer actively monitors.

Many large loans are split into "pieces" (pari passu loans) held by different trusts. This trust owns only a portion of these larger loans, meaning its exposure to any single property is often less than the total loan amount.

Financial Health and Liquidity

The trust's financial health primarily depends on the performance of its underlying mortgage loans and its ability to generate sufficient cash flow. This cash flow must meet its obligations and allow for distributions to certificate holders.

• Assets and Liabilities: As of December 31, 2025, the trust's main asset is the outstanding principal balance of its commercial mortgage loans, totaling approximately $785 million. The outstanding CMBS certificates issued by the trust represent its corresponding liabilities.
• Cash Flow: The trust generates liquidity from scheduled principal and interest payments on the mortgage loans, as well as from prepayments and proceeds from resolving specially serviced loans. The trust uses these cash inflows to pay servicing fees, administrative expenses, and to make timely interest and principal distributions to certificate holders. Timely interest distributions throughout 2025 indicate healthy operational cash flow from the performing loan pool.
• Servicing Advances: When loans become delinquent, the Master Servicer and/or Special Servicer may need to advance funds for delinquent principal and interest payments, and for property protection and preservation expenses (e.g., taxes, insurance). The trust generally recovers these advances from future loan payments or liquidation proceeds. We monitor the level of outstanding advances as an indicator of potential future losses or liquidity strain on the servicers.
• Reserve Accounts: The trust maintains various reserve accounts, as stipulated in the pooling and servicing agreement. These accounts cover potential shortfalls in loan payments, property protection expenses, or other trust expenses. The Certificate Administrator manages the balances in these accounts to ensure the trust's ongoing operational stability.

Overall financial health benefits from the significant principal reduction since inception and the relatively low, albeit increasing, delinquency rate. However, the concentration of loans in special servicing represents a potential drain on cash flow and a source of potential losses.

Risk Factors: Key Risks & Challenges Ahead

While the trust has performed reasonably well, investors should be aware of these ongoing risks:

• Interest Rate Environment: Higher interest rates could impact property valuations and make refinancing more challenging for loans maturing in the next few years. This could potentially lead to more special servicing transfers and increased default risk.
• Office Market Headwinds: The office sector continues to face challenges from remote work trends, potentially affecting occupancy, rental income, and cash flow for the office loans in the portfolio. This could lead to increased defaults or lower recovery rates.
• Maturity Risk: With an average remaining term of 3.5 years, a significant portion of the portfolio will mature in the coming years. Borrowers' ability to refinance these loans, particularly in a higher interest rate environment or for properties in challenged sectors, will be critical.
• Economic Slowdown: A broader economic downturn, including recessionary pressures, could impact tenant demand, property income, and borrowers' ability to repay across all property types.
• Special Servicing Outcomes: The resolution of the 5 loans currently in special servicing will directly impact the trust's performance. There is always a risk of losses on these distressed assets, and the timing and severity of these losses are uncertain.
• Concentration Risk: While diversified, certain property types (e.g., office, retail) or geographic regions may experience disproportionate stress, impacting the trust's performance.

Competitive Position

This section is not applicable to the Bank of America Merrill Lynch Commercial Mortgage Trust 2016-UBS10. As a securitization trust, its purpose is to hold a static pool of commercial mortgage loans and pass through payments to investors. It does not engage in competitive activities like acquiring new customers, developing products, or competing for market share in the traditional sense. Its performance depends solely on its underlying assets and the effectiveness of its servicers.

Future Outlook

For 2026, the trust will focus on proactively managing maturing loans and diligently resolving specially serviced assets. Servicers will work closely with borrowers to navigate the current economic landscape, aiming to mitigate potential losses and maximize recoveries. This includes exploring loan modifications, extensions, or, if necessary, foreclosure and liquidation strategies for distressed assets.

The trust's diversification across property types and geographies provides a degree of stability. However, the performance of individual assets, particularly those in the office sector and those nearing maturity, will be key to its continued health. The trust anticipates continued timely distributions of interest, subject to the underlying loan pool's performance and any future losses incurred.

This summary provides a clearer picture of the trust's financial standing and the factors influencing its performance. We trust this overview enhances your understanding of your investment.