DBRS Morningstar Confirms All Ratings on Wells Fargo Commercial Mortgage Trust 2015-C30, Removes Five Classes from Under Review with Negative Implications

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-C30 issued by Wells Fargo Commercial Mortgage Trust 2015-C30 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 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 F at B (high) (sf)
-- Class X-FG at B (sf)
-- Class G at B (low) (sf)

In addition, DBRS Morningstar discontinued the rating on Class A-2 as it was paid out as of the November 2020 remittance.

Classes E, F, G, X-E, and X-FG were removed from Under Review with Negative Implications where they were placed on August 6, 2020. The trends on these classes are Negative. All other trends are Stable. The Negative trends reflect the continued performance challenges for the underlying collateral, much of which has been driven by the impact of the Coronavirus Disease (COVID-19) pandemic. In addition to loans representing 3.3% of the pool being in special servicing as of the November 2020 remittance, DBRS Morningstar also notes that the pool has a significant concentration in retail and hospitality properties, representing 22.5% and 12.4% of the pool balance, respectively. These property types have been the most severely affected by the initial effects of the coronavirus pandemic and, as such, those concentrations suggest increased risks for the pool, particularly at the lower rating categories, since issuance.

As of the November 2020 remittance, 95 of the original 101 loans remain in the pool, representing a 7.9% reduction of collateral. There are three loans, representing 3.3% of the pool, with the special servicer, the largest of which, Sheraton Crescent Phoenix (Prospectus ID#16, 1.3% of the pool), is secured by a 342-room full-service hotel in Phoenix. The loan had performed well, reporting a 2018 debt service coverage ratio (DSCR) of 2.02 times (x), but experienced a sharp decline in 2019, prior to the coronavirus pandemic, when it reported a DSCR of 0.92x. While the franchise agreement with Sheraton Crescent Phoenix runs through 2032 and the hotel was last renovated in 2014, the 2019 operating statement reported a 17.9% increase in general expenses when compared with the issuer’s underwritten level. Of specific concern, the franchise fee increased by 58.9% since issuance and 45.3% over the prior year. Additionally, repair and maintenance items increased by 26.8% since issuance and 5.7% over the prior year. The loan transferred to the special servicer in March 2020 and the servicer has not provided any additional information regarding the increase in franchise fees. However, a May 2020 inspection noted roof repairs as well as some room repairs were ongoing. The hotel was re-appraised in October 2020 at $11 million ($32,164 per room), which is encouraging as it remains above the $9.1 million loan balance. The servicer comments indicate they are working toward an agreement for temporary debt relief. DBRS Morningstar expects the loan will return to the master servicer once a modification is in place.

There are 29 loans, representing 27.6% of the pool, on the servicer’s watchlist. These loans are being monitored for various reasons including low DSCR or occupancy, tenant rollover risk, and/or pandemic-related forbearance requests. Three of the watchlisted loans, collectively representing 7.0% of the pool balance, have received temporary debt relief. The largest of these three is the Hilton Garden Inn – Downtown Denver loan (Prospectus ID#4, 4.5% of the pool balance), followed by the Best Western Brooklyn loan (Prospectus ID#17, 1.4% of the pool balance) and the Holiday Inn Winter Haven loan (Prospectus ID#21, 1.2% of the pool balance). The servicer noted the Hilton Garden Inn – Downtown Denver and the Holiday Inn Winter Haven have each begun repayment of past due debt service as of the November 2020 remittance. Also of concern is the Plaza Diamond Bar loan (Prospectus ID#13, 1.6% of the pool), which is secured by a 61,857-square-foot office/retail property that is about 30 miles east of Los Angeles. The largest tenant is Horizon University, a Christian educational institution accounting for 10% of the property’s gross leasable area, which has a lease expiration in August 2021. It is unclear at this time if the tenant will renew or vacate. Although historical performance has been strong with a 2019 DSCR of 1.51x and 87% occupancy, the borrower notified the master servicer of coronavirus-related hardship and the loan is now delinquent. DBRS Morningstar expects an imminent transfer to the special servicer.

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, X-FG, and PEX 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#4 – Hilton Garden Inn – Downtown Denver (4.5% of the pool)
-- Prospectus ID#13 – Plaza Diamond Bar (1.6% of the pool)
-- Prospectus ID#17 – Best Western Brooklyn (1.4% of the pool)
-- Prospectus ID#16 – Sheraton Crescent Phoenix (1.3% of the pool)
-- Prospectus ID#21 – Holiday Inn Winter Haven (1.2% 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. 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.

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