Press Release

DBRS Morningstar Confirms Ratings on Wells Fargo Commercial Mortgage Trust 2015-LC22, Removes Four Classes from Under Review with Negative Implications

CMBS
November 24, 2020

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-LC22 issued by Wells Fargo Commercial Mortgage Trust 2015-LC22 (the Issuer) as follows:

-- 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-E at BB (sf)
-- Class E at BB (low) (sf)
-- Class X-F at B (high) (sf)
-- Class F at B (sf)

DBRS Morningstar also removed the ratings on Classes E, F, X-E, and X-F from Under Review with Negative Implications, where they were placed on August 6, 2020. The trends on Classes E, F, X-E, and X-F are Negative, reflecting the continued performance challenges that the underlying collateral faces, mainly driven by the impacts of the Coronavirus Disease (COVID-19) global pandemic. The trends on all other classes are Stable.

As of the October 2020 remittance, seven loans, representing 6.3% of the current trust balance, are in special servicing, six of which are secured by hotel assets: Homewood Suites Austin (Prospectus ID#21; 1.2% of the current trust balance), Best Western International Drive - Orlando (Prospectus ID#31; 0.8% of the current trust balance), Homewood Suites Houston Intercontinental (Prospectus ID#39; 0.7% of the current trust balance), Sun and Sand Myrtle Beach (Prospectus ID#42; 0.7% of the current trust balance), Courtyard Memphis East Lenox (Prospectus ID#44; 0.7% of the current trust balance), and HIE Natchez (Prospectus ID#45; 0.7% of the current trust balance).

The largest loan in special servicing is the Clearwater Collection loan (Prospectus ID#17; 1.5% of the current trust balance). Clearwater Collection, secured by a 134,361-square-foot retail property in Clearwater, Florida, originally transferred to the special servicer in July 2018 because of payment default. According to the servicer, the sponsor—Gary J. Dragul—was indicted for fraudulent activities unrelated to the subject financing in April 2018. In March 2020, LA Fitness, representing 33% of the net rentable area (NRA), stopped paying rent and has since defaulted on its lease, which was set to expire in April 2022. Prior to the coronavirus pandemic, LA Fitness indicated that it planned to vacate the subject, but had agreed to continue paying rent for the remainder of the lease. The sponsor has filed suit to recover back payments and the remainder of payments. The largest tenant, Floor & Decor, occupies 49% of the NRA with a lease that expires in May 2022. The servicer reports that the sponsor has abandoned the property and a cash management account has been set up while the servicer pursues foreclosure. Given the subject’s current headwinds, DBRS Morningstar analyzed the loan with an elevated probability of default.

As of the October 2020 remittance, 96 of the original 100 loans remain in the pool, representing a collateral reduction of approximately 9.0% since issuance. Eight loans, representing 12.3% of the current trust balance, are fully defeased. Based on the YE2019 financials, the pool reported a weighted-average debt service coverage ratio (DSCR) of 1.66 times (x) compared with the Issuer’s underwritten DSCR of 2.08x. Additionally, 27 loans, representing 28.4% of the current trust balance, are on the servicer’s watchlist. These loans are being monitored for a variety of reasons, including low DSCR, occupancy concerns, and deferred maintenance issues; however, many loans have recently been added to the servicer’s watchlist for coronavirus-related reasons.

The transaction is concentrated by property type with office properties comprising the largest concentration at 23.3% of the current trust balance. There is additional concentration in retail and hotel assets as 28 loans, representing 22.6% of the current trust balance, are secured by retail assets while 19 loans, representing 14.6% of the current trust balance, are secured by hotel assets. The initial effects of the coronavirus pandemic have most severely affected hotel properties and, as such, the relatively high concentration of loans backed by that property type in this pool suggests that risks have increased, particularly in the lower rating categories, since issuance.

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-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#17 – Clearwater Collection (1.5% 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 (March 6, 2020), 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.

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.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

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

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 696-6293

Ratings

  • Date IssuedDebt RatedRatingTrendActionAttributesi
    24-Nov-20Commercial Mortgage Pass-Through Certificates, Series 2015-LC22, Class A-3AAA (sf)StbConfirmed
    US
    24-Nov-20Commercial Mortgage Pass-Through Certificates, Series 2015-LC22, Class A-4AAA (sf)StbConfirmed
    US
    24-Nov-20Commercial Mortgage Pass-Through Certificates, Series 2015-LC22, Class A-SAAA (sf)StbConfirmed
    US
    24-Nov-20Commercial Mortgage Pass-Through Certificates, Series 2015-LC22, Class A-SBAAA (sf)StbConfirmed
    US
    24-Nov-20Commercial Mortgage Pass-Through Certificates, Series 2015-LC22, Class X-AAAA (sf)StbConfirmed
    US
    24-Nov-20Commercial Mortgage Pass-Through Certificates, Series 2015-LC22, Class BAA (low) (sf)StbConfirmed
    US
    24-Nov-20Commercial Mortgage Pass-Through Certificates, Series 2015-LC22, Class CA (low) (sf)StbConfirmed
    US
    24-Nov-20Commercial Mortgage Pass-Through Certificates, Series 2015-LC22, Class PEXA (low) (sf)StbConfirmed
    US
    24-Nov-20Commercial Mortgage Pass-Through Certificates, Series 2015-LC22, Class DBBB (low) (sf)StbConfirmed
    US
    24-Nov-20Commercial Mortgage Pass-Through Certificates, Series 2015-LC22, Class X-EBB (sf)NegConfirmed
    US
    24-Nov-20Commercial Mortgage Pass-Through Certificates, Series 2015-LC22, Class EBB (low) (sf)NegConfirmed
    US
    24-Nov-20Commercial Mortgage Pass-Through Certificates, Series 2015-LC22, Class X-FB (high) (sf)NegConfirmed
    US
    24-Nov-20Commercial Mortgage Pass-Through Certificates, Series 2015-LC22, Class FB (sf)NegConfirmed
    US
    More
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Wells Fargo Commercial Mortgage Trust 2015-LC22
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.