DBRS Morningstar Confirms All Classes of Wells Fargo Commercial Mortgage Trust 2015-NXS2

DBRS, Inc. (DBRS Morningstar) confirmed all classes of the Commercial Mortgage Pass-Through Certificates, Series 2015-NXS2 issued by Wells Fargo Commercial Mortgage Trust 2015-NXS2 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-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (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 CCC (sf)

All trends are Stable with the exception of Class F, which does not carry a trend because of the CCC (sf) rating. Class F is designated as having Interest in Arrears.

The ratings confirmations reflect a credit profile that, despite having nine loans totaling 19.7% of the trust balance in special servicing, is relatively unchanged since the prior review. As of the February 2022 remittance, 60 of the original 63 loans remain in the pool, with an aggregate principal balance of $743.0 million, representing a collateral reduction of 18.7% since issuance. Nine loans, representing 9.2% of the current trust balance, are fully defeased. There are 14 loans, representing 31.3% of the pool, being monitored on the servicer’s watchlist.

The largest specially serviced loan, Embassy Suites Nashville (Prospectus ID#5; 5.3% of the pool) is secured by a 208-key full-service hotel in Nashville, Tennessee. The loan transferred to special servicing in June 2020 for monetary default as a result of the pandemic. The borrower and lender entered into a forbearance agreement in February 2021 and the loan has since been brought current. The loan will return to the master servicer upon the establishment of agreed upon cash management accounts. Annualized net cash flows for YE2021 are positive, compared to the negative cash flows reported at YE2020. As of December 2021, the trailing three month (T-3) occupancy, average daily rate (ADR), and revenue per available room (RevPAR) were reported at 66.3%, $182, and $120, respectively. The T-3 RevPAR penetration rate was 96.6%.

The largest loan in the pool, Campbell Technology Park (Prospectus ID#2; 8.1% of the pool) was added to the servicer’s watchlist in February 2022 as a result of declining occupancy. As of YE2021, occupancy was reported at 64.7%, with four of the five largest tenants at the property (37.6% of net rental area (NRA)) set to expire throughout 2022. The fifth-largest tenant, Centric (6.1% of NRA), had a lease expiry in January 2022 but remains at the property according to the company’s website. In November 2021, the servicer reported that the largest tenant, Dialog (16.0% of NRA), and the fourth-largest tenant, Bit Glass (6.7% of NRA), are in discussions for renewal. According to Reis, the average vacancy rate for the submarket is 26.0%. Despite the declining occupancy levels, financial performance remains strong.

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 and X-E 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#2 – Campbell Technology Park (8.1% of the pool)
-- Prospectus ID#20 – Hotel Andra (1.8% 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/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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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