DBRS Morningstar Confirms All Ratings of Wells Fargo Commercial Mortgage Trust 2016-C33

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2016-C33 issued by Wells Fargo Commercial Mortgage Trust 2016-C33 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 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-F at B (sf)
-- Class F at B (low) (sf)

Classes E, F, X-E, and X-F 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 7.7% of the pool being in special servicing as of the December 2020 remittance, DBRS Morningstar also notes that the pool has a significant concentration in retail and hospitality properties, representing 21.4% and 14.6% 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 December 2020 remittance, 75 of the original 79 loans remain in the pool, representing a 17.6% reduction of collateral. There are five loans, representing 7.7% of the pool, with the special servicer, the largest of which, Doubletree Seattle Airport Southcenter (Prospectus ID#5, 4.5% of the pool), is secured by a 215-room full-service hotel that is about two miles from the airport and 10 miles outside of downtown Seattle. The hotel had displayed stable performance prior to the coronavirus. The YE2019 financials reported a net cash flow (NCF) of $3.0 million, a debt service coverage ratio (DSCR) of 1.57 times (x), and occupancy at 85%, all of which are in line with the issuer’s levels. A 2020 appraisal reported a value of $29.0 million implying a current loan-to-value ratio of 91%. However, the loan is now delinquent, and the servicer commentary indicated they are considering some form of debt relief.

After the December 2020 remittance was reported, the Holiday Inn & Suites Parsippany Fairfield loan(Prospectus ID#20, 1.8% of the pool) transferred to the special servicer due to imminent performance concerns. The loan is secured by a 184-room hotel in Parsippany, New Jersey, which is about 30 miles east of New York City. The hotel completed a major property improvement plan renovation in 2018 and the YE2019 financials reported cash flow in line with the issuance level. However, the hotel is facing coronavirus-related hardships like many other hotels across the country and the loan fell delinquent in 2020. As this is a new transfer, there is very little information available at this time and an updated appraisal has not been reported.

There are 13 loans, representing 15.5% 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 watchlist loans, collectively representing 3.2% of the pool balance, have been modified with forbearance agreements.

The Parkview at Spring Street loan (Prospectus ID#9, 3.0% of the pool) is secured by a 100,895-square foot (sf) Class B office building in Silver Springs, Maryland, which is approximately seven miles from Washington, D.C. Although the loan is not on the servicer watchlist, the second-largest tenant at the property, Torti Gallas & Partners, occupying 22,000 sf or 22% of the gross leasable area, is expected to vacate the space at its scheduled lease expiration in July 2021. The YE2019 financials reported a $1.3 million NCF, 1.20x DSCR, and 92% occupancy, which compares to the issuer’s figures of $1.4 million NCF, 1.26x DSCR, and 98% occupancy.

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-D, 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 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 [email protected].

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