DBRS Morningstar Confirms Ratings on All Classes of Wells Fargo Commercial Mortgage Trust 2018-C44, Changes Trend on One Class

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2018-C44 issued by Wells Fargo Commercial Mortgage Trust 2018-C44 as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-B at AA (high) (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class X-D at BBB (high) (sf)
-- Class D at BBB (sf)
-- Class E-RR at BBB (low) (sf)
-- Class F-RR at BB (sf)
-- Class G-RR at B (high) (sf)

DBRS Morningstar changed the trend on Class G-RR to Negative from Stable. All other trends are Stable.

The Negative trend on the lowest-rated class is reflective of DBRS Morningstar’s concerns with the largest specially serviced loan, Prince and Spring Street Portfolio (Prospectus ID#9; 4.0% of the pool balance). This loan is secured by a portfolio of three mixed-use properties in New York City. The loan transferred to special servicing in December 2020 for payment default and the loan was last paid through September 2020. According to the January 2021 appraisal, the property was valued at $35.3 million, a 46.5% decline from the issuance value of $66.0 million, and is below the whole-loan balance of $41.0 million.

The most recent financials, representing the trailing six months ended June 30, 2021, reported an occupancy rate of 94.6% and debt service coverage ratio (DSCR) of 0.72 times (x). According to the April 2021 rent roll, the most recent on file, the multifamily portion of the collateral was 91.8% occupied and the retail portion was 87.7% occupied. The largest retail tenant is Spring Lounge, representing 6.2% of the collateral net rentable area (NRA) on a lease through April 2022, followed by John Fluevog Boots & Shoes at 3.1% of NRA on a month-to-month lease. The former second-largest (Mulberry Burger; 6.2% of NRA) and third-largest (Torrisi; 3.1% of NRA) tenants vacated in 2020 because of business interruptions stemming from the pandemic. However, replacement tenants Wan Wan LLC and Bel NYC LLC have been signed to fill the spaces. The collateral benefits from its location in the well-established neighborhood of Nolita and within a heavily retail-concentrated area that experiences high foot traffic. With this review, DBRS Morningstar increased the probability of default (POD) to increase the expected loss in its analysis.

The rating confirmations reflect DBRS Morningstar’s view of the generally stable credit risk for the transaction since issuance. As of the January 2022 remittance report, all 44 of the original loans remain in the pool with a nominal collateral reduction of 1.8% because of scheduled loan amortization. Twelve loans are on the watchlist and three loans are in special servicing, representing 25.8% and 6.0% of the pool balance, respectively. DBRS Morningstar applied stressed POD scenarios to increase the expected loss where significantly increased risks were observed. Although the risks for some of the loans are elevated when compared with issuance, the overall increased risk to the trust is low, supporting the ratings confirmations with Stable trends on all but one class.

At issuance, DBRS Morningstar assigned investment-grade shadow ratings to one loan, 181 Fremont Street (Prospectus ID#7; 4.0% of pool). With this review, DBRS Morningstar confirms that the performance of the loan remains in line with investment-grade loan characteristics.

ESG CONSIDERATIONS
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, and X-D 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#1 – Village at Leesburg (8.8% of the pool)
-- Prospectus ID#9 – Prince and Spring Street Portfolio (4.0% of the pool)
-- Prospectus ID#14 – Aloft Hotel Raleigh (2.8% 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 26, 2021), 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

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 [email protected].

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].

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