DBRS Finalizes Provisional Ratings on Wells Fargo Commercial Mortgage Trust 2015-C28

DBRS, Inc. (DBRS) has today finalized its provisional ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2015-C28 (the Certificates) issued by Wells Fargo Commercial Mortgage Trust 2015-C28. The trends are Stable.

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-E at AAA (sf)
-- Class X-F at AAA (sf)
-- Class X-G at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class PEX at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (low) (sf)

Classes E, F, X-E, X-F and X-G have been privately placed.

Classes X-A, X-E, X-F and X-G balances are notional. DBRS ratings on interest-only (IO) certificates address the likelihood of receiving interest based on the notional amount outstanding. DBRS considers the IO certificates’ position within the transaction payment waterfall when determining the appropriate rating.

Classes A-4FL, A-4FX and X-B have been discontinued, as these classes have been withdrawn.

Up to the full certificate balance of the Class A-S, Class B and Class C certificates may be exchanged for Class PEX certificates. Class PEX certificates may be exchanged for up to the full certificate balance of the Class A-S, Class B and Class C certificates.

The collateral consists of 99 fixed-rate loans secured by 134 commercial and multifamily properties, comprising a total transaction balance of $1,164,686,419. The DBRS sample included 38 of the 99 loans in the pool, representing 75.1% of the pool by loan balance. The DBRS average sample net cash flow adjustment for the pool was -8.7%. DBRS identified 14 loans within the pool (18.4%) that have sponsorship associated with a prior discounted payoff, loan default, voluntary bankruptcy filing, limited liquidity, a historical negative credit event and/or inadequate commercial real estate experience. DBRS increased the probability of default (POD) for loans with identified sponsorship concerns. Overall, the pool is relatively diverse based on loan size, with a concentration profile equivalent to that of a pool of 32 equal-sized loans. Diversity is further enhanced by nine loans, representing 21.9% of the pool, that are secured by multiple properties (44 properties in total). Increased pool diversity helps to insulate the higher-rated classes from event risk. There are only seven loans, representing 9.5% of the pool, leased to single tenants (or predominantly to single tenants). Loans secured by properties occupied by single tenants have been found to have higher losses in the event of default. Only 14 loans, representing 9.9% of the pool, are secured by hotels, which have the highest cash flow volatility of all major property types. Many recent conduit transactions have had hotel concentrations in excess of 15% of the pool.

The transaction has a high concentration of loans with elevated refinance risk. Thirty-nine loans, representing 64.8% of the pool, have DBRS refinance debt service coverage ratios (Refi DSCRs) of less than 1.00 times (x). Twenty of these loans, representing 44.7% of the pool, have DBRS Refi DSCRs of less than 0.90x; however, the DBRS Refi DSCRs for these loans are based on a weighted-average (WA) stressed refinance constant of 9.8%, which implies an interest rate of 9.2%, amortizing on a 30-year schedule. This represents a significant stress of 5.1% over the WA interest rate of the loans in the pool. There are 49 loans, representing 75.1% of the pool, that are IO for a portion of their respective loan terms, including seven of the largest loans. Of these loans, six comprising 16.2% of the transaction balance are IO for the full loan term. DBRS models POD based on the more constraining of the DBRS Term DSCR or the DBRS Refi DSCR, and loans that lack amortization are treated more punitively.

The ratings assigned to the Certificates by DBRS are based exclusively on the credit provided by the transaction structure and underlying trust assets. All classes will be subject to ongoing surveillance, which could result in upgrades or downgrades by DBRS after the date of issuance.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The Rule 17g-7 Report of Representations and Warranties is hereby incorporated by reference and can be found by clicking on the link to the right under Other Research or by contacting us at info@dbrs.com.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodology is North American CMBS Rating Methodology, which can be found on our website under Methodologies.

The full report providing additional analytical detail is available by clicking on the link below or by contacting us at info@dbrs.com.