DBRS Confirms Ratings of Wells Fargo Commercial Mortgage Trust 2015-C27

DBRS Limited (DBRS) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-C27 as follows issued by Wells Fargo Commercial Mortgage Trust 2015-C27:

-- Class A-4 at AAA (sf)
-- Class A-5 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 C at A (low) (sf)
-- Class PEX at A (low) (sf)
-- Class X-B at BBB (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. In addition, DBRS discontinued the rating on Class A-3 as the class repaid with the December 2018 remittance.

The rating confirmations reflect the overall stable performance of the transaction since issuance. At issuance, the collateral consisted of 95 loans secured by 124 commercial and multifamily properties, with a trust balance of $1,048 million. Per the January 2019 remittance, 87 of the original 95 loans remain in the pool with a current trust balance of $951.0 million, representing a collateral reduction of 9.5% due to loan repayment and scheduled amortization. To date, approximately 96.6% of the pool has reported YE2017 financials. Based on the most recent year-end reporting, the pool reported a weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.17 times (x) and 10.6%, respectively, compared with the DBRS Term DSCR and DBRS Debt Yield figures 1.37x and 8.2% at issuance, respectively. Based on the same reporting, the top 15 loans (50.2% of the pool) reported a WA DSCR of 1.78x compared with the WA DBRS Term DSCR of 1.46x, reflecting 22.2% net cash flow growth over the DBRS issuance figures. As of the January 2019 remittance, there are two loans (0.8% of the pool) in special servicing and 15 loans (14.9% of the pool) on the servicer’s watchlist. Both loans in special servicing are real estate owned and have reported drastic declines in value since issuance, according to the most recent appraisals received. As such, DBRS anticipates the trust to incur a loss of approximately $3.2 million with the workout of these loans, reflecting a WA loss severity for the two loans of 41.5%.

Of the 15 loans on the servicer’s watchlist, nine of them (6.5% of the pool) were flagged for performance-related reasons. The largest of these loans, 312 Plum (Prospectus ID#17; 1.9% of the pool), was flagged due to tenant rollover, as the property’s largest tenant, D+H USA Corporation (formerly 26.6% of the net rentable area (NRA)), vacated in November 2018 upon lease expiration. The collateral is secured by a 230,438-square-foot (sf) Class A office property located in Cincinnati, Ohio. DBRS has requested an update on the borrower’s plans to backfill the space and is now monitoring this loan on the DBRS Hotlist given the heightened vacancy of nearly 40.0% and soft market fundamentals for Class A Office product in the Cincinnati central business district, with vacancy typically hovering around 15.0% since issuance. The second largest of these loans, Plaza Mayor Shopping Center (Prospectus ID#22; 1.6% of the pool), is secured by a 72,540 sf anchored retail centre located in Torrance, California. The loan was flagged for a low DSCR, driven by increased vacancy, which reached 26.5% as of October 2018. The space was formerly occupied by Big Lots (26.5% of the NRA), which vacated upon lease expiration in July 2016 and has not yet been backfilled. Although the servicer has confirmed that there are prospective tenants in lease negotiations with the borrower, which would help to improve performance significantly, terms have not yet been provided. As of Q3 2018, the loan reported an annualized amortizing DSCR of 0.58x compared with 0.68x as at YE2017 and 0.82x as at YE2016.

Classes X-A, X-B, 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 are subject to 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:

-- Prospectus ID#1 – Westfield Palm Desert (6.6% of the pool)
-- Prospectus ID#17 – 312 Plum (1.9% of the pool) (DBRS Hotlist)
-- Prospectus ID#22 – Plaza Mayor Shopping Center (1.6% of the pool)
-- Prospectus ID#50 – Holiday Inn Express Nicholasville (0.5% of the pool)
-- Prospectus ID#53 – Country Club Apartment (0.5% of the pool)
-- Prospectus ID#78 – Peoria Multifamily Portfolio (0.3% of the pool)

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 most outstanding commercial mortgage-backed securities transactions (including non-DBRS rated), as well as loan-level and transaction-level commentary for most DBRS-rated and -monitored transactions.

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

The principal methodology is North American CMBS Surveillance, which can be found on www.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, which can be found on www.dbrs.com in the Commentary tab under Regulatory Affairs. 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.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada