Press Release

DBRS Morningstar Confirms All Classes of Wells Fargo Commercial Mortgage Trust 2018-C43, Removes Two Classes from Under Review with Negative Implications

CMBS
January 21, 2021

DBRS Limited (DBRS Morningstar) confirmed all classes of Commercial Mortgage Pass-Through Certificates, Series 2018-C43 issued by Wells Fargo Commercial Mortgage Trust 2018-C43 as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at A (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (low) (sf)
-- Class X-D at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (low) (sf)

DBRS Morningstar removed Classes E and F from Under Review with Negative Implications, where we placed them on August 6, 2020. All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance. As of the December 2020 remittance, 62 of the original 63 fixed-rate loans secured by 132 commercial and multifamily properties remain in the pool with a collateral reduction of 2.5% since issuance. According to the YE2019 financials, the servicer reported a weighted-average (WA) debt service coverage ratio (DSCR) of 2.03 times (x), compared with the DBRS Morningstar DSCR at issuance of 1.89x.

As of the December 2020 remittance, there are two loans in special servicing, including the 15th-largest loan in the pool, Galleria Oaks (Prospectus ID#15, 2.2% of the pool balance), which is secured by an unanchored retail property in Austin, Texas. The loan was transferred to special servicing in April 2020 because of prohibited liens filed against the collateral, with the servicer reporting that a nonjudicial foreclosure notice was posted in August 2020 for a September 2020 foreclosure sale. The sponsor has not provided specifics on the liens, but DBRS Morningstar found news articles suggesting the liens are mechanic’s liens.

The servicer ordered third-party reports; however, the borrower has not complied with the servicer’s requests for access to the property, which is impeding the process for the foreclosure sale. As of YE2019, the servicer reported a DSCR of 1.10x and an occupancy rate for the property of 92.3%. The three largest tenants consist of North Austin Bingo-ABH Property Management LLC (10.3% of the net rentable area (NRA), expiring January 2028), Wellmed Medical Management (10.2% of the NRA, expiring September 2023), and Discount Tire Company (7.0% of the NRA, expiring August 2024) and represent a total of 27.5% of the NRA. Given the borrower’s lack of cooperation with the servicer and the outstanding defaults on the loan, DBRS Morningstar applied an elevated probability of default in the analysis for this loan to increase the expected loss for this review.

The second-largest loan in special servicing is the Fairfield Inn & Suites - Willow Grove (Prospectus ID#24, 1.1% of the pool balance) loan, which is secured by a 108-key limited-service hotel in Willow Grove, Pennsylvania. The loan first went delinquent in March 2020 and has been delinquent since then. The loan was transferred to special servicing in June 2020, and the borrower has requested relief in the form of a forbearance of debt service payments from January 2021 through August 2021 and interest-only (IO) payments from September 2021 through the November 2027 maturity date. The servicer and borrower continue to negotiate the terms of a potential modification, but nothing has been finalized to date. Given the extended delinquency and the borrower’s request for an IO structure for the remainder of the loan, the risks are significantly increased for this loan from issuance; therefore, DBRS Morningstar analyzed this loan with a higher probability of default to increase the expected loss for this review.

DBRS Morningstar is also monitoring a top-five loan, Southpoint Office Center (Prospectus ID#4, 5.2% of the pool), which is secured by an office building in Bloomington, Minnesota. The loan is currently performing, but the property’s occupancy rate significantly dropped when the former largest tenant, Wells Fargo (18.2% of the NRA), vacated the property at lease expiry in October 2020. With the loss of that tenant, the implied occupancy rate based on the September 2020 occupancy of 86.4% is 68.2%. Some of the remaining tenants include United Bank (11.4% of the NRA, expiring December 2025) and Maruette Transportation Finance (5.3% of the NRA, expiring December 2026).

As of a Q3 2020 Reis report, the Southwest/Northeast Scott County submarket reported an average vacancy rate of 17.6% and experienced a 8.4% decline in job growth. Because Wells Fargo previously represented more than 20.0% of the base rental income and re-leasing the space amid a weakening submarket will be challenging, DBRS Morningstar applied an elevated probability of default in the analysis for this loan to increase the expected loss for this review.

According to the December 2020 remittance, 11 loans are on the servicer’s watchlist, representing 9.1% of the current pool balance. The servicer is monitoring these loans for various reasons, including a low DSCR or occupancy figure, tenant rollover risk, and/or Coronavirus Disease (COVID-19) pandemic-related forbearance requests.

ESG CONSIDERATIONS
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.

DBRS Morningstar materially deviated from its North American CMBS Insight Model when determining the rating on Class B as the quantitative results suggested a lower rating. The material deviation is warranted given the sustainability of loan performance trends have not yet been demonstrated.

Classes X-A, X-B, and X-D are IO certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated reference 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 – Southpoint Office Center (5.2% of the pool)
-- Prospectus ID#15 – Galleria Oaks (2.2% 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 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 info@dbrsmorningstar.com.

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 info@dbrsmorningstar.com.

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Tel. +1 416 593-5577

Ratings

  • Date IssuedDebt RatedRatingTrendActionAttributesi
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2018-C43, Class A-1AAA (sf)StbConfirmed
    CA
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2018-C43, Class A-2AAA (sf)StbConfirmed
    CA
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2018-C43, Class A-3AAA (sf)StbConfirmed
    CA
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2018-C43, Class A-4AAA (sf)StbConfirmed
    CA
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2018-C43, Class A-SAAA (sf)StbConfirmed
    CA
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2018-C43, Class A-SBAAA (sf)StbConfirmed
    CA
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2018-C43, Class X-AAAA (sf)StbConfirmed
    CA
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2018-C43, Class BAA (sf)StbConfirmed
    CA
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2018-C43, Class X-BA (sf)StbConfirmed
    CA
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2018-C43, Class CA (low) (sf)StbConfirmed
    CA
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2018-C43, Class X-DBBB (sf)StbConfirmed
    CA
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2018-C43, Class DBBB (low) (sf)StbConfirmed
    CA
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2018-C43, Class EBB (low) (sf)StbConfirmed
    CA
    21-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2018-C43, Class FB (low) (sf)StbConfirmed
    CA
    More
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Wells Fargo Commercial Mortgage Trust 2018-C43
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:AA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:A (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:A (low) (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:BBB (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:BBB (low) (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:BB (low) (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • Date Issued:Jan 21, 2021
  • Rating Action:Confirmed
  • Ratings:B (low) (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • 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

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