DBRS Confirms Ratings of Wells Fargo Commercial Mortgage Trust 2016-C32, Stable Trends

DBRS Limited (DBRS) has today confirmed the ratings of all classes of Commercial Mortgage Pass-Through Certificates, Series 2016-C32 (the Certificates) issued by Wells Fargo Commercial Mortgage Trust 2016-C32 (the Trust) as follows:

-- 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 A-3FL at AAA (sf)
-- Class A-3FX at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-E at AAA (sf)
-- Class X-F at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class X-D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (low) (sf)

All trends are Stable. DBRS does not rate the first loss piece, Class G.

The rating confirmations reflect that the transaction’s current performance remains stable. The collateral consists of 112 fixed-rate loans secured by 152 commercial properties. As of the January 2017 remittance, all 112 loans remain in the pool with an aggregate outstanding principal balance of approximately $955 million, which represents a collateral reduction of 0.3% since issuance as a result of scheduled loan amortization. Pool-wide, four loans (15.6% of the pool) are structured with full interest-only (IO) terms, while an additional 38 loans (48.1% of the pool) have partial IO periods remaining, ranging from ten months to 72 months. According to the DBRS underwritten (UW) figures, the transaction had a weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield of 1.66 times (x) and 10.1%, respectively, or 1.45x and 8.9%, respectively, excluding loans secured by cooperative properties. To date, 99 loans (88.0% of the pool) have reported partial-year 2016 net cash flow (NCF) figures. The pool is relatively diverse based on loan size, as the Top 15 loans only represent 51.6% of the current pool balance. The 12 loans (45.4% of the pool) that reported annualized 2016 NCFs in the Top 15 reported a WA DSCR of 1.60x compared with the DBRS UW figure of 1.51x, which reflects a 7.4% NCF growth.

As of the January 2017 remittance, there are no loans in special servicing and eight loans (4.9% of the pool) on the servicer’s watchlist. The largest loan, Northline Industrial Center (Prospectus ID#12, 2.1% of the pool) is secured by a 1.1 million-square foot industrial warehouse located in Romulus, Michigan, 22 miles south of the Detroit central business district. The loan was placed on the watchlist with the December 2016 remittance because of the near-term rollover of the property’s largest tenant, Renaissance Global Logistics (34.6% of the net rentable area (NRA)), which had lease expirations in September 2016 (8.6% of the NRA) and January 2017 (26.0% of the NRA). DBRS has requested a leasing update; however, to date, CoStar reports that the property has 0.0% vacancy.

DBRS has provided updated loan-level commentary and analysis for larger and/or pivotal watchlisted and specially serviced loans, as well as for the largest 15 loans in the pool, in the DBRS CMBS IReports platform. To view these and future loan-level updates provided as part of DBRS’s ongoing surveillance for this transaction, please log into DBRS CMBS IReports at www.ireports.dbrs.com.

The ratings assigned to Classes E and F materially deviate from the higher ratings implied by the quantitative results. The deviations are warranted because sustainability of loan trends has not yet been demonstrated.

For more information on these rating actions, please contact us at info@dbrs.com.

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

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

The applicable methodologies are North American CMBS Rating Methodology (January 2017) and CMBS North American Surveillance (December 2016), which can be found on our website under Methodologies.