DBRS Morningstar Confirms All Classes of Wells Fargo Commercial Mortgage Trust 2015-NXS3

DBRS Morningstar confirmed all classes of Commercial Mortgage Pass-Through Certificates, Series 2015-NXS3 (the Certificates) issued by Wells Fargo Commercial Mortgage Trust 2015-NXS3 as follows:

-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 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-D at BBB (low) (sf)
-- Class X-E at BB (sf)
-- Class E at BB (low) (sf)
-- Class X-FG at B (high) (sf)
-- Class F at B (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance, when the pool consisted of 56 fixed-rate loans secured by 59 commercial properties with a trust balance of $814.5 million. As of the March 2020 remittance, 54 loans remained in the pool, including four fully defeased loans representing 9.7% of the pool balance. The collateral has been reduced by 15.6% since issuance as a result of scheduled amortization and the full repayment of two loans, including the largest loan at issuance, One Court Square. Based on most recent reporting, the pool has a weighted-average (WA) loan to value ratio of 57.% and a WA debt service coverage ratio of 1.94x.

The transaction benefits from a substantial urban concentration including 13 loans, representing 22.0% of the pool, which are secured by properties in urban markets. Additionally, two of the top 15 loans exhibit credit characteristics consistent with investment-grade shadow ratings (11 Madison Avenue – Prospectus ID#6, 4.9% of the pool and The Parking Spot LAX – Prospectus ID#15, 1.9% of the pool). With this review, DBRS Morningstar confirmed both loans continue to perform in line with the investment-grade shadow ratings. The pool is concentrated by loan size, with the top 10 loans representing 59.0% of the pool balance. In addition, 15 loans, representing 34.2% of the pool, are made up of retail properties and 10 loans, representing 15.8% of the pool, are secured by office properties. There are 25 loans, representing 44.2% of the pool, that have partial interest-only (IO) periods and six loans, comprising 19.6% of the loan pool, structured with full IO terms.

As of the March 2020 remittance, there were 17 loans, representing 12.8% of the pool, on the servicer’s watchlist, and no loans in special servicing. The two largest loans on the watchlist collectively represent 3.9% of the pool balance. 722 12th Street NW (Prospectus ID #14, 2.2% of the pool) is secured by an office property in Washington, D.C., and is being monitored for a decline in occupancy and DSCR. The 10203 Santa Monica Boulevard loan (Prospectus ID #19, 1.7% of the pool) is secured by an office property in Santa Monica, California, and is on the watchlist for intermittent delinquency, with the loan showing current as of the March 2020 remittance.

DBRS Morningstar notes there are two hotel loans among the largest five loans in the pool in Yosemite Resorts (Prospectus ID #3, 8.6% of the pool) and Hilton Nashville (Prospectus ID #5, 6.5% of the pool). As the effects of the Coronavirus Disease (COVID-19) outbreak of 2020 have halted travel across the United States, the hospitality industry has reported immediate and, in some cases, severe impacts. Hotels are reporting sharp drop-offs in bookings and spikes in cancellations through the summer as Americans and global travelers alike cancel scheduled trips amid the pandemic. Both of the hotel loans in question for the subject transaction are secured by properties performing in line with issuance expectations, but the collateral for each will undoubtedly face significant stress in the near to moderate term as the ripple effects of these events unfold over the next few months. DBRS Morningstar is monitoring these and other larger hotel loans closely and will provide loan level updates as information is received from the servicer with regard to property-specific effects within the DBRS Viewpoint platform, for which information is provided, below.

Classes X-A, X-D, X-E, and X-FG are 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.

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.

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#3 – Yosemite Resorts (8.6% of the pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes loan-level 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 the North American CMBS Surveillance Methodology, which can be found on www.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 www.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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