Morningstar DBRS Confirms Credit Ratings on All Classes of Wells Fargo Commercial Mortgage Trust 2021-C60

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2021-C60 issued by Wells Fargo Commercial Mortgage Trust 2021-C60 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 A-S at AAA (sf)
-- Class B at AAA (sf)
-- Class X-B at AA (sf)
-- Class C at AA (low) (sf)
-- Class X-D at AA (low) (sf)
-- Class D at A (high) (sf)
-- Class E-RR at A (low) (sf)
-- Class F-RR at BBB (high) (sf)
-- Class G-RR at BBB (sf)
-- Class H-RR at BB (high) (sf)
-- Class J-RR at BB (high) (sf)
-- Class K-RR at BB (low) (sf)
-- Class L-RR at B (low) (sf)

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the transaction, which generally remains in line with Morningstar DBRS' expectations since issuance as evidenced by the pool's healthy weighted-average (WA) debt service coverage ratio (DSCR) of 2.46 times (x).

The pool's concentration of loans backed by office properties is relatively low, representing less than 15.0% of the pool balance; however, Morningstar DBRS notes that there is one large office loan in the pool in Gramercy Plaza (Prospectus ID# 5; 3.7% of the pool), a suburban office property in Torrance, California, which has experienced some performance decline since issuance. Occupancy has declined notably to 80% as of June 2024 from 90% at issuance and several larger tenants having leases scheduled to expire prior to the loan's maturity. Offsetting some of this concern is the loan's strong reported YE2023 DSCR of 2.89x and a reserve balance in excess of $3.0 million. For this review, Morningstar DBRS increased the probability of default (POD) penalties and/or stressed loan-to-value ratios (LTVs) for loans exhibiting increased credit risk since issuance resulting in a marginal increase to the pool expected loss since the prior credit rating action in October 2023.

As of the October 2024 remittance, 59 of the original 61 loans remain outstanding, with a total trust balance of $729.0 million, representing minimal collateral reduction since issuance. There are 12 loans, representing about 20.0% of the current pool balance, on the servicer's watchlist, of which only six loans, representing about 11.5% of the pool balance, are being monitored for performance related declines, and one loan, representing only 0.8% of the pool, is in special servicing. Since the last credit rating action, one loan liquidated from the pool, incurring a realized trust loss of $2.7 million, relatively in line with Morningstar DBRS' estimate.

The third largest loan in the pool Malibu Colony Plaza (Prospectus ID#3, 6.6% of the pool), which is secured by a 114,370-square-foot (sf) shopping center in Malibu, California, is exhibiting increased credit risk since the last credit rating action. The anchor tenant, Ralph's Fresh Store, occupying more than 30% of the net rentable area (NRA), is currently leased on a month-to-month basis after its previous lease expired in August 2023. In addition, the second largest tenant, CVS, representing about 20% of NRA, has a lease scheduled to expire in January 2025. The loan reported a YE2023 occupancy rate and DSCR of 92% and 1.60x, respectively. Given the concentrated upcoming rollover risk for month-to-month Ralph's Fresh Store and CVS, the collateral faces exposure to significant potential cash flow decline and Morningstar DBRS analyzed this loan with a POD penalty resulting in an expected loss that was about 60% higher than the deal average.

Boonton Industrial (Prospectus ID#35; 0.8% of the pool), is secured by the borrower's fee-simple interest in a 55,000 sf light industrial warehouse in Boonton, New Jersey. The loan transferred to special servicing in December 2022 because of payment default and the current workout strategy is foreclosure. The subject most recently reported an occupancy rate of 100% along with a below breakeven DSCR of 0.72x for the trailing three month period ended March 31, 2024. Morningstar DBRS notes this represents a partial-year reporting; however, despite requests, the borrower has not provided any additional historical operating performance figures since issuance. At issuance, the property was leased solely to J. Supor & Son Trucking & Rigging Co., Inc. on a long-term lease extending to 2041. The February 2024 appraised value of $11.0 million is above the issuance value of $9.6 million, and represents a LTV of 56%.

At issuance, one loan--The Grace Building (Prospectus ID#2; 6.8% of the pool)--was assigned an investment-grade shadow rating by Morningstar DBRS. With this review, Morningstar DBRS confirms that the performance of this loan remains consistent with the investment-grade characteristics based on strong credit metrics and continued stable performance.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings at https://dbrs.morningstar.com/research/437781 (August 13, 2024).

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 credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

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

The principal methodology is North American CMBS Surveillance Methodology (March 1, 2024), https://dbrs.morningstar.com/research/428798.

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

The credit ratings were initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for these credit rating actions.

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

These are solicited credit ratings.

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

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

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

-- North American CMBS Multi-Borrower Rating Methodology/North American CMBS Insight Model v 1.2.0.0 (March 1, 2024), https://dbrs.morningstar.com/research/428797
-- Rating North American CMBS Interest-Only Certificates (June 28, 2024), https://dbrs.morningstar.com/research/435294
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria, (September 19, 2024), https://dbrs.morningstar.com/research/439702
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283
-- Legal Criteria for U.S. Structured Finance (April 15, 2024), https://dbrs.morningstar.com/research/431205

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.