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

DBRS Limited (DBRS) 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-3FL at AAA (sf)
-- Class A-3FX 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 (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class X-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 rating confirmations reflect the overall stable performance of the transaction since issuance. At issuance, the collateral consisted of 112 fixed-rate loans secured by 152 commercial properties, with a trust balance of $960.0 million. Per the November 2018 remittance, all loans remain in the pool with a current trust balance of $940.0 million, representing a collateral reduction of 2.0% due to scheduled loan amortization. Approximately 99.0% of the pool reported YE2017 financials and, based on the most recent reporting, the pool reported a weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.65 times (x) and 10.4%, respectively. At issuance, the pool reported a DBRS WA Term DSCR and debt yield of 1.66x and 10.1%, respectively. Based on the most recent reporting, the top 15 loans (51.9% of the current pool balance) reported a WA DSCR and debt yield of 1.76x and 10.4%, respectively. There is one loan (0.5% of the current pool balance) that is fully defeased. Thirty-one loans (12.3% of the current pool balance) are secured by cooperative properties that have very low leverage, with minimal term and refinance default risk.

There are 16 loans (7.3% of the current pool balance) on the servicer’s watchlist, eight of which are secured by cooperative properties, representing 2.4% of the current pool balance. These loans are flagged due to cash flow declines, deferred maintenance and tenant rollover. In addition, there are two loans (0.8% of the current pool balance) in special servicing, including Tops Plaza (Prospectus ID#61; 0.4% of the pool) and Summit Marketplace (Prospectus ID#70; 0.4% of the current pool balance). Tops Plaza was transferred to the special servicer due to Tops Friendly Markets’ announcement in August 2018 of store closures as part of its bankruptcy strategy and, according to the servicer, the bankruptcy courts approved the assumption of the lease and reduced rental payments. Summit Marketplace was transferred to the special servicer due to ongoing litigation issues surrounding the property’s owner, who was indicted on several counts of securities fraud in April 2018. According to the servicer, a receiver is in control of the property. DBRS analyzed both loans with a stressed cash flow scenario in its analysis for this review.

Classes X-A, X-D, X-E and X-F 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:

-- Marriott Melville Long Island — Prospectus ID#2 (6.3% of the pool)
-- 10 South La Salle Street — Prospectus ID#6 (3.2% of the pool)
-- Cottonwood Shopping Center — Prospectus ID#9 (2.2% of the pool)
-- Sequoia Center Building 1400 — Prospectus ID#26 (1.0% of the pool)
-- Tops Plaza — Prospectus ID#61 (0.4% of the pool)
-- Summit Marketplace — Prospectus ID#70 (0.4% of the pool)

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

The principal methodology is North American CMBS Surveillance, which can be found on dbrs.com under Methodologies & Criteria. 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.

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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

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