DBRS Confirms All Classes of Wells Fargo Commercial Mortgage Trust 2015-NXS2

DBRS Limited (DBRS) confirmed the ratings on the Commercial Pass-Through Certificates, Series 2015-NXS2 (the Certificates) issued by Wells Fargo Commercial Mortgage Trust 2015-NXS2 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-5 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A 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 X-E at BB (sf)
-- Class E at BB (low) (sf)
-- Class X-F at B (sf)
-- Class F at B (low) (sf)

All trends are Stable.

The Class A-S, Class B and Class C Certificates may be exchanged for the Class PEX Certificates (and vice versa).

The rating confirmations reflect the overall stable performance of the transaction since issuance. The transaction consists of 63 fixed-rate loans secured by 77 commercial and multifamily properties. According to the June 2018 remittance, the pool has experienced a collateral reduction of 1.8% since issuance because of scheduled loan amortization, with all original loans remaining in the pool and an aggregate outstanding principal balance of $898.0 million. There are 60 loans, representing 96.9% of the current pool balance, that are reporting year-end 2017 financials. These loans exhibited an improved weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.78 times (x) and 9.7%, respectively, compared with the 1.68x WA DBRS Term DSCR and 8.5% WA DBRS Debt Yield for those same loans at issuance. Overall, the pool’s WA net cash flow increased by 16.1% since issuance. The top 15 loans, which collectively represent 58.6% of the pool, reported a WA DSCR and Debt Yield of 1.78x and 8.8%, respectively. The pool benefits from a healthy concentration of properties located in urban markets (18.1% of the pool balance) and a relatively low concentration of properties located in tertiary and rural markets, which represent only 7.4% of the pool balance. The largest loan in the pool, Patriots Park (10.0% of the pool balance), was shadow-rated investment grade at issuance to reflect the long-term credit tenant and the loan’s cash flow sweep triggers. With this review, DBRS has confirmed that the characteristics of the loan remain in line with the investment grade rating. Two loans, comprising of 15.0% of the pool, are scheduled to mature in 2019, which include the Patriots Park loan and 100 West 57th Street (Prospectus ID #4). Refinance risk is considered minimal for both loans due to desirable property locations and strong cash flows for each.

As of the June 2018 remittance, there are 17 loans, comprising 44.8% of the pool, that are either full term interest-only (IO) or have partial IO remaining throughout the term. Six of the top 15 loans, comprising 32.7% of the pool, are fully IO. The IO loans in the pool reported a WA debt yield of 9.0% and DSCR of 1.86x, both healthy metrics overall.

There are four loans, representing 3.3% of the pool balance, on the servicer’s watchlist. Two loans are on the watchlist for recent vacancies or upcoming lease expirations. One loan is secured by a hotel property located in a rural/tertiary market that is showing significant cash flow declines since issuance. The remaining loan was placed on the watchlist for failure to submit financials. DBRS analyzed the watchlisted loans with materially increased risk factors using a stressed scenario to increase the probability of default for this review.

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

All ratings will be subject to ongoing surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

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:

-- Patriots Park
-- Campbell Technology Park
--Fairfield Inn & Suites Mt. Vernon
-- Durango Shopping Center

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.

Notes:
All figures are 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.