DBRS Morningstar Confirms All Classes of Wells Fargo Commercial Mortgage Trust 2015-NXS1

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2015-NXS1 issued by Wells Fargo Commercial Mortgage Trust 2015-NXS1 as follows:

-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB 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 X-F at B (high) (sf)
-- Class F at B (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which has been paid down by 19.8% since issuance. As of the March 2021 remittance, the trust collateral consists of 62 of the original 68 loans, totaling $765.9 million. The transaction has a concentration of office properties, which benefit from leases to tenants that have generally shown greater resilience during the Coronavirus Disease (COVID-19) pandemic than others, such as restaurants and retailers. In total, 14 loans, representing 38.1% of the pool, are secured by office properties, including the three largest loans in the transaction: Stanford Research Park (Prospectus ID#3; 6.5% of the pool), Eastgate One Phases I-VII & XII (Prospectus ID#3; 6.4% of the pool), and Eastgate Two Phases VIII-X (Prospectus ID#5; 5.1% of the pool). The transaction also benefits from defeasance collateral, as seven loans, representing 12.3% of the current pool balance, are defeased.

The transaction has exposure to retail and hotel properties, representing 23.9% and 11.8% of the current pool balance, respectively, which have been disproportionately affected by the ongoing pandemic. As of the March 2021 reporting, three loans, representing 6.3% of the pool, are in special servicing and 10 loans, representing 16.3% of the pool, are on the servicer’s watchlist. The largest specially serviced loan, Hotel Andra (Prospectus ID#13; 3.1% of pool), is secured by a 119-key boutique hotel in downtown Seattle. The loan transferred to special servicing in March 2020 for imminent monetary default at the borrower’s request. The hotel has remained closed since March 2020, and the loan remains outstanding for the May 2020 debt service payment. According to the February 2021 asset status report provided by the servicer, the borrower indicated it does not have the ability to fund the loan shortfalls or contribute additional capital toward the property. The special servicer has received consent to take the necessary steps to appoint Manhattan Hospitality Advisors as receiver of the property and enter into a deed in lieu of foreclosure or initiate foreclosure proceedings. The property was reappraised in October 2020 for $40.0 million, down 27.0% from the issuance value of $54.8 million; however, the appraiser did indicate collateral value upside in the near term, provided the impact from the pandemic subsides. The loan was liquidated from the trust as part of the subject analysis, resulting in an implied loss severity exceeding 10.0%.

The second-largest loan in special servicing, 9990 Richmond (Prospectus ID#17; 2.5% of the pool), is secured by a Class B office property in the Westchase submarket of Houston. The loan transferred to special servicing in January 2021 for imminent monetary default; however, the property had reported declining cash flows since 2018 as a result of increased vacancy. According to the servicer, the borrower has executed a pre-negotiation letter and made a relief proposal, and the workout is in the initial stages given the recent transfer. According to the YE2020 rent roll, the property was 65.7% occupied at an average rental rate of $19.92 per square foot (psf) gross. The subject is in a soft submarket, as according to a Q4 2020 Reis report, Class B office product in the Westheimer/Westchase submarket reported an average vacancy rate of 24.3% with an average asking rental rate of $20.61 psf gross. The servicer has not obtained an updated appraisal as of yet, but DBRS Morningstar expects the as-is value has fallen significantly from issuance given the performance declines and deterioration in the market. In the analysis for this review, a liquidation scenario was analyzed that resulted in a loss severity exceeding 40.0%.

The transaction structure benefits from an unrated $46.1 million first loss piece in the Class G certificate, which absorbs the losses assumed by DBRS Morningstar in the analysis for the two specially serviced loans as discussed above. There has been one small loss incurred by the trust to date caused by$478,215 in fees that were collected by the special servicer with the resolution of the Patriots Park loan, which was repaid in full in October 2019.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Classes X-A, X-B, 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 issuance metrics and all historical surveillance commentary on 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 US 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.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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