DBRS Morningstar Confirms Ratings on All Classes of Wells Fargo Commercial Mortgage Trust 2015-C30

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-C30 issued by Wells Fargo Commercial Mortgage Trust 2015-C30 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 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 B (high) (sf)
-- Class X-FG at B (sf)
-- Class G at B (low) (sf)

All trends are Stable.

The rating confirmations and Stable trends reflect DBRS Morningstar’s current outlook and loss expectations for the transaction, which remain relatively unchanged from the November 2022 review. At that time, DBRS Morningstar changed the trends on Classes F , G and X-FG to Stable from Negative, given the improved outlook of select loans, primarily those secured by retail and lodging properties, which had previously faced disruptions as a result of the Coronavirus Disease (COVID-19) pandemic. In addition, DBRS Morningstar noted that the transaction as a whole continued to benefit from increased credit support to the bonds as a result of scheduled amortization, loan repayments, and significant defeasance.

At issuance, the transaction consisted of 101 fixed-rate loans secured by 111 commercial and multifamily properties, with an aggregate trust balance of $740.3 million. As of the June 2023 remittance, 95 loans remain within the transaction with a trust balance of $649.3 million, reflecting collateral reduction of 12.30% since issuance. There are currently 19 fully defeased loans, representing 28.75% of the pool. Three loans, representing 3.29% of the pool, are currently in special servicing; including two secured by retail assets that are real estate owned (REO) and 10 loans, representing 4.84% of the pool, are on the servicer’s watchlist.

The transaction is concentrated by property type, with loans representing 22.52%, 14.13%, and 10.86% of the pool collateralized by retail, multifamily, and office properties, respectively. The majority of loans secured by office properties in this transaction continue to exhibit healthy credit metrics, reflecting a weighted-average debt yield of 13.90% based on the most recent financials available. However, DBRS Morningstar has a cautious outlook for this asset type as sustained upward pressure on vacancy rates in the broader office market may challenge landlords’ efforts to back-fill vacant space, and, in certain instances, contribute to value declines, particularly for assets in noncore markets and/or with disadvantages in location, building quality, or amenities offered. Where applicable, DBRS Morningstar increased the probability of default (POD) penalties and, in certain cases, applied stressed loan-to-value ratios (LTVs) for loans that are secured by office properties.

The largest loan in special servicing, Sheraton Crescent Phoenix (Prospectus ID#16; 1.3% of the current pool), is secured by the borrower's fee-simple interest in a 342-key, full-service hotel property in Phoenix. At issuance, room revenue was generated primarily from business travellers (40.0%) and meeting/group demand (35.0%), with the remainder coming from leisure guests (25%). The loan transferred to special servicing in March 2020 for imminent monetary default. As of the most recent reporting, dated June 2023, the loan is delinquent having last paid in April 2021. The borrower and special servicer have entered into multiple rounds of negotiations regarding a potential forbearance; however, both parties were unable to reach an agreement, prompting the special servicer to file a motion to appoint a receiver for the property. That motion was denied and the servicer has confirmed that the borrower continues to work on a sale of the asset. The loan is currently cash managed.

Operating performance has improved from the lows reported during the pandemic, with the property reporting YE2022 occupancy rate, average daily rate (ADR), and revenue per available room (RevPAR) metrics of 52.10%, $130.60, and $68.04, respectively, which compare favourably with the YE2020 figures of 52.1%, $129.10, and $67.20. However, reported net cash flow (NCF) remains subdued with the YE2022 figure of $490,091 over 50.0% lower than the issuance figure of $1.0 million. The most recent appraisal, dated December 2022, valued the property at $23.0 million, a significant improvement from the March 2022 appraised value of $12.5 million. Based on this updated value, which is approximately 84.0% above the previous appraisal, DBRS Morningstar does not expect a loss at resolution; however, it notes that there remains increased default risk from issuance given the sustained decline in cash flow, extended period of time in special servicing, and contractions in demand from business/group travel. DBRS Morningstar analysed this loan with a stressed POD penalty, with the resulting expected loss more than two times (x) the pool average.

The second-largest loan in special servicing, Bristol Retail Portfolio (Prospectus ID#24; 1.1% of the current pool), is secured by the borrower's fee-simple interests in a portfolio of nine unanchored retail properties with a combined 84,984 square feet in Bristol, a town that straddles the border between Virginia and Tennessee. Portfolio cash flows began to decline in 2017, which was further exacerbated by the pandemic. The loan transferred to special servicing in February 2019 and the portfolio became REO in October 2020. As of the June 2023 reporting period, DBRS Morningstar estimates the loan has accumulated in excess of $1.6 million in outstanding servicer advances and appraisal subordinate entitlement reductions (ASERs), bringing the loan's total exposure closer to $9.2 million. The most recent appraisal reported by the servicer, dated November 2022, valued the portfolio at $6.1 million, down 45.50% from the appraised value of $11.2 million at issuance. The servicer engaged a new property manager who is working to stabilize operations, with an expected REO sale between the end of 2023 and Q1 2024. Based on a haircut to the most recent appraisal, DBRS Morningstar projects a loss severity in excess of 55.0% will be realized at liquidation.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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 (July 4, 2023) at https://www.dbrsmorningstar.com/research/416784.

Classes X-A, X-B, X-E, X-FG, and PEX 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 credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology (March 16, 2023; https://www.dbrsmorningstar.com/research/410912).

Other methodologies referenced in this transaction are listed at the end of this press release.

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 credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action.

DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

North American CMBS Multi-Borrower Rating Methodology (March 16, 2023)/North American CMBS Insight Model v 1.1.0.0 (https://www.dbrsmorningstar.com/research/410913)

Rating North American CMBS Interest-Only Certificates (December 19, 2022; https://www.dbrsmorningstar.com/research/407577)

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 12, 2022; https://www.dbrsmorningstar.com/research/402646)

North American Commercial Mortgage Servicer Rankings (September 8, 2022; https://www.dbrsmorningstar.com/research/402499)

Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023; https://www.dbrsmorningstar.com/research/415687)

Legal Criteria for U.S. Structured Finance (December 7, 2022;
https://www.dbrsmorningstar.com/research/407008)

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/417279.

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