DBRS Confirms All Classes of Wells Fargo Commercial Mortgage Trust 2017-RC1

DBRS Limited (DBRS) confirmed all classes of the Commercial Mortgage Pass-Through Certificates, Series 2017-RC1 issued by Wells Fargo Commercial Mortgage Trust 2017-RC1 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-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class X-B at A (high) (sf)
-- Class C at A (sf)
-- Class X-D at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class X-E at BB (low) (sf)
-- Class F at B (low) (sf)
-- Class X-F at B (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall performance of the transaction, which has remained in line with DBRS expectations since issuance. The collateral consists of 61 fixed-rate loans secured by 78 commercial and multifamily properties. As at the February 2018 remittance, there has been a collateral reduction of 0.4% as a result of scheduled loan amortization. Eleven loans, representing 33.8% of the pool balance, are structured with full-term interest-only (IO) payments. An additional 15 loans, representing 34.1% of the pool, have partial IO payments remaining, with seven of those loans (15.5% of the pool) scheduled to begin amortizing in the next year. Loans representing 79.0% of the current pool balance reported Q3 2017 financials and reported a weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.89 times (x) and 11.0%, respectively. All but one of the largest 15 loans reported partial-year 2017 financials, with a WA DSCR and WA debt yield of 1.83x and 10.1%, respectively, representing a WA cash flow improvement of 5.8% over the DBRS net cash flow figures derived at issuance.

As at the February 2018 remittance, there were three loans on the servicer’s watchlist, collectively representing 4.2% of the pool, and no loans in special servicing. Two of the loans on the watchlist are being monitored due to incomplete financial reporting. Both of those loans are secured by co-operative housing properties that are low-leveraged with minimal term and refinance default risk. The largest loan on the watchlist, Prospectus ID #10 – The Strand on Ocean Drive (3.2% of the current pool balance), was added to the watchlist in August 2017 for a low DSCR caused by temporary free-rent periods that recently expired. A holdback was structured at issuance and will be held until the tenants are operational and paying rent. For additional information on this loan, please see the loan commentary on the DBRS Viewpoint platform, for which information is provided below.

Classes X-A, X-B, X-D, X-E and X-F are IO certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated reference tranche adjusted upward by one notch if senior in the waterfall.

As part of this review, DBRS has provided updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#1 – Hyatt Place Portfolio
-- Prospectus ID#5 – Promenade at Tutwiler Farm
-- Prospectus ID#9 – Carrollton Avenue Shopping Center
-- Prospectus ID#10 – The Strand on Ocean Drive
-- Prospectus ID#11 – Palms of Carrollwood
-- Prospectus ID#14 – Peachtree Mall

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for the entire CMBS universe, as well as deal and loan-level commentary for all DBRS rated transactions.
The ratings assigned to Classes C and D materially deviate from the higher ratings implied by the quantitative results. DBRS considers a material deviation to be a rating differential of three or more notches between the assigned rating and the rating implied by the quantitative results that is a substantial component of a rating methodology. The deviations are warranted due to the sustainability of loan performance trends not demonstrated.

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

The principal methodology is CMBS North American Surveillance, which can be found on dbrs.com under Methodologies. For a list of the Structured Finance related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document on www.dbrs.com. Please note that not every related methodology listed under a principal Structured Finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrs.com.

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

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.