DBRS Morningstar Confirms All Classes of Wells Fargo Commercial Mortgage Trust 2015-LC20

DBRS Limited (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-LC20 issued by Wells Fargo Commercial Mortgage Trust 2015-LC20 as follows:

-- 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-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class X-B at A (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 rating confirmations reflect the overall stable performance of the transaction, which has remained in line with DBRS Morningstar’s expectations since issuance. As of the February 2020 remittance, there has been a collateral reduction of 6.9% since issuance, with 65 of the original 68 loans remaining in the pool. There are five loans, representing 15.9% of the pool, that are fully defeased.

Loans representing 82.1% of the pool reported year-end (YE) 2018 or YE2019 financials, with a weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.62 times (x) and 10.0%, respectively. The largest 15 non-defeased loans reported YE2018 or YE2019 financials with a WA DSCR and WA debt yield of 1.51x and 9.0%, respectively, representing a WA cash flow improvement of 10.0% over the DBRS Morningstar net cash flow figures derived at issuance.

As of the February 2020 remittance, there are nine loans, representing 18.7% of the pool (including four loans in the Top 15), that are on the servicer’s watchlist and three loans, representing 4.4% of the pool in special servicing. The watchlisted 18th Street Atrium loan (Prospectus ID#8, 3.5% of the pool) is secured by an office building in downtown Denver and is also being monitored on the DBRS Morningstar Hotlist after three tenants, representing 81.6% of the net rentable area (NRA), vacated the property over the last two years. Performance is expected to improve, however, as the background check company Checkr Inc., announced in October 2019 that it has signed an 11-year lease at the subject for approximately 82.6% of the NRA. For additional information, please see the loan commentary for this loan in the DBRS Morningstar Viewpoint platform.

The two largest loans in special servicing, Shop City Shopping Center (Prospectus ID#13, 2.0% of the pool) and 377 Broadway (Prospectus ID#23, 1.5% of the pool), both transferred to special servicing in 2019 due to non-monetary defaults. Shop City Shopping Center, secured by a grocery-anchored shopping center in Syracuse, New York, transferred to special servicing due to non-compliance with cash management provisions that were triggered following bankruptcy filings for Tops Friendly Markets (Tops) (22.1% of the NRA) and Fallas (10.8% of the NRA). The Tops store remains open; however, Fallas has closed. The loan was 60 to 89 days delinquent as of the February 2020 remittance.

377 Broadway, secured by a three-level retail and commercial condominium unit in the TriBeCa neighborhood of Manhattan, transferred to special servicing after the borrower modified the property’s single tenant affiliate lease for a reduced rate without lender consent. The loan reported a YE2018 DSCR of 1.04x and an annualized Q3 2019 DSCR of 1.24x and remains current as of the February 2020 remittance. Both loans were modeled with an increased probability of default in the analysis for this review to increase the expected losses for each.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

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 Morningstar.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#8 – 18th Street Atrium (3.5% of the pool)
-- Prospectus ID#13 – Shop City Shopping Center (2.0% of the pool)
-- Prospectus ID#23 – 377 Broadway (1.5% of the pool)
-- Prospectus ID#39 – Masonic Building (0.9% of the pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is North American CMBS Surveillance Methodology, which can be found on dbrsmorningstar.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 Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.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 [email protected].

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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