Press Release

Morningstar DBRS Assigns Provisional Credit Ratings to Wells Fargo Commercial Mortgage Trust 2025-5C5

CMBS
July 08, 2025

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2025-5C5 (the Certificates) to be issued by Wells Fargo Commercial Mortgage Trust 2025-5C5 (the Trust):

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

All trends are Stable.

The collateral for the Trust consists of 32 loans secured by 46 commercial and multifamily properties with an aggregate cut-off date balance of approximately $596.0 million. Two loans, representing 9.2% of the pool, are shadow-rated investment grade by Morningstar DBRS. Morningstar DBRS analyzed the conduit pool to determine the provisional credit ratings, reflecting the long-term probability of loan default within the term and its liquidity at maturity. When the cut-off balances were measured against the Morningstar DBRS net cash flow (NCF) and their respective constants, the initial Morningstar DBRS weighted-average (WA) debt service coverage ratio (DSCR) of the pool was 1.38 times (x). Excluding the two shadow-rated loans, the DSCR drops to 1.28x. Of the 32 loans, 22, representing 59.7% of the pool, have a Morningstar DBRS DSCR of below 1.37x, which have historically had higher default frequencies. The WA Morningstar DBRS Issuance loan-to-value ratio (LTV) of the pool was 56.0% and the pool is scheduled to amortize to a WA Morningstar DBRS Balloon LTV of 55.6% at maturity based on the A note balances. Excluding the shadow-rated loans, the deal still exhibits a moderate WA Morningstar DBRS Issuance LTV of 57.6% and a WA Morningstar DBRS Balloon LTV of 57.2%. Four of the 32 loans, representing 14.0% of the pool, have Morningstar DBRS issuance LTV ratios above 67.6%, which have historically had higher default frequencies. The transaction has a sequential-pay pass-through structure.

Two loans, representing 9.2% of the pool, exhibited credit characteristics consistent with investment-grade shadow credit ratings. The Wharf, which makes up 8.4% of the pool, exhibited credit characteristics consistent with an investment-grade shadow credit rating of A (high). Making up 0.8% of the pool, 1535 Broadway exhibited credit characteristics consistent with an investment-grade shadow credit rating of AAA. Both conduit contributions are pari passu with Morningstar DBRS-rated single-asset/single-borrower transactions (WHARF Commercial Mortgage Trust 2025-DC and BWAY Trust 2025-1535, respectively). The pool's Morningstar DBRS issuance LTV is 56.0% (57.6% excluding shadow-rated loans), and it has a Morningstar DBRS Balloon LTV of 55.6% (57.2% excluding shadow-rated loans). Loans with Issuance LTVs below 67.6% have historically experienced below average default frequency. There are only four loans (14.0% of the pool) with Morningstar DBRS issuance LTVs above 67.6%.

Representing 29.4% of the pool, 14 are within Morningstar DBRS market ranks of 6 or 7, which are indicative of dense urban areas that benefit from increased liquidity driven by consistently strong investor demand, even during times of economic stress. Markets with these rankings benefit from lower default frequencies than less dense suburban, tertiary, and rural markets. Additionally, 17 loans, representing 51.3% of the pool, are in Metropolitan Statistical Area (MSA) Group 3, which represents the best-performing group in terms of historical CMBS default rates among the top 25 MSAs.

The property quality assessment of 11 loans, representing 66.8% of the sample and 55.8% of the pool, was Above Average or Average +. There were only two loans, representing 6.5% of the sample and 5.4% of the pool, that received a property quality assessment of Average -. The remaining loans in the pool received a property quality assessment of Average. Higher-quality properties are more likely to retain existing tenants/guests and more easily attract new tenants/guests, resulting in a more stable performance. Morningstar DBRS conducted a cash flow underwriting review and cash flow stability and structural review on 19 of the 32 loans in the pool, representing 83.6% of the pool. The Morningstar DBRS sample has an average NCF variance of -16.3% that ranged from -2.3% to -38.4%.

Representing 90.1% of the pool, 27 loans are being used to refinance existing debt. Additionally, two loans, representing 7.2% of the pool, are recapitalizations. Morningstar DBRS views loans that refinance existing debt as more credit negative compared with loans that finance an acquisition. Acquisition financing typically includes a meaningful cash investment from the sponsor, which aligns its interests more closely with the lender's, whereas refinance transactions may be cash neutral or cash-out transactions, the latter of which may reduce the borrower's commitment to a property. The refinance and recapitalization loans in the pool exhibit moderate leverage, with a WA Morningstar DBRS issuance LTV of 55.4% and a WA Morningstar DBRS Balloon LTV of 55.0%.

The pool includes 28 loans, representing 86.4%, with interest-only (IO) payment structures throughout the loan term, meaning that the principal balance of these loans will remain unchanged unless a principal paydown is made. Loans with IO payment structures potentially face refinance risk at maturity in the event that the appraised values do not remain stable. The pool's IO loans generally exhibit low leverage, with a WA Morningstar DBRS issuance LTV of 56.4%.

The pool also includes 24 loans, representing 69.6% of the pool, that exhibit negative leverage, defined as the issuer's implied cap rate (issuer's NCF divided by the appraised value), less the current interest rate. On average, the transaction exhibits -1.07% of negative leverage. While cap rates have been increasing over the last few years, they have not surpassed the current interest rates. In the short term, this suggests borrowers are willing to have their equity returns reduced to secure financing. In the longer term, should interest rates hold steady, the loans in this transaction could be subject to negative value adjustments that may affect the borrower's ability to refinance its loans.

Six loans, representing 26.1% of the pool, were assigned a Morningstar DBRS sponsor strength of weak, which increases the probability of default (POD) in Morningstar DBRS' model. Morningstar DBRS generally applied this to sponsors who had lower net worth and liquidity, a history of prior defaults, or a lack of experience in commercial real estate. These loans have a WA Morningstar DBRS issuance LTV of 62.1%, representing a moderate leverage point that has historically seen lower rates of default.

Properties in New York City secure 13 loans, representing 24.4% of the pool. Conduit pools generally benefit from location diversity in case there is an adverse event affecting a certain location. Changes in New York and New York City government policy or local economic trends could negatively affect around a quarter of the loans in the pool secured by properties in New York City. All of the loans in New York City have an MSA group of 3 and a market rank of 6 or 7, which have historically seen lower default rates.

Morningstar DBRS' credit ratings on the Certificates address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related Principal Distribution Amounts and/or Interest Distribution Amounts for the rated classes.

Morningstar DBRS' credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, Yield Maintenance Charges and Prepayment Premiums.

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 credit 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 factors 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 (May 16, 2025): https://dbrs.morningstar.com/research/454196.

Classes X-A, X-B, X-D, 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 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 Multi-Borrower Rating Methodology (April 9, 2025): https://dbrs.morningstar.com/research/451739

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

With regard to due diligence services, Morningstar DBRS was provided with the Form ABS Due Diligence-15E (Form-15E), which contains a description of the information that a third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While due diligence services outlined in Form-15E do not constitute part of Morningstar DBRS' methodology, Morningstar DBRS used the data file outlined in the independent accountant's report in its analysis to determine the credit ratings referenced herein.

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

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

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

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of final credit ratings on the above-mentioned securities is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

Please see the 17g-7 disclosure report and/or 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 Commercial Mortgage Servicer Rankings (August 23, 2024),
https://dbrs.morningstar.com/research/438283
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702
-- Legal Criteria for U.S. Structured Finance (December 3, 2024),
https://dbrs.morningstar.com/research/444064
--North American Single-Asset/Single-Borrower Ratings Methodology (February 28, 2025),
https://dbrs.morningstar.com/research/448962
--North American CMBS Insight Model v 1.3.0.0:
https://dbrs.morningstar.com/research/451739

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

Ratings

  • Date IssuedDebt RatedRatingTrendActionAttributesi
    08-Jul-25Commercial Mortgage Pass-Through Certificates, Series 2025-5C5 Class A-1(P) AAA (sf)StbProvis.-New
    US
    08-Jul-25Commercial Mortgage Pass-Through Certificates, Series 2025-5C5 Class A-2(P) AAA (sf)StbProvis.-New
    US
    08-Jul-25Commercial Mortgage Pass-Through Certificates, Series 2025-5C5 Class A-3(P) AAA (sf)StbProvis.-New
    US
    08-Jul-25Commercial Mortgage Pass-Through Certificates, Series 2025-5C5 Class A-S(P) AAA (sf)StbProvis.-New
    US
    08-Jul-25Commercial Mortgage Pass-Through Certificates, Series 2025-5C5 Class X-A(P) AAA (sf)StbProvis.-New
    US
    08-Jul-25Commercial Mortgage Pass-Through Certificates, Series 2025-5C5 Class B(P) AA (sf)StbProvis.-New
    US
    08-Jul-25Commercial Mortgage Pass-Through Certificates, Series 2025-5C5 Class X-B(P) A (high) (sf)StbProvis.-New
    US
    08-Jul-25Commercial Mortgage Pass-Through Certificates, Series 2025-5C5 Class C(P) A (sf)StbProvis.-New
    US
    08-Jul-25Commercial Mortgage Pass-Through Certificates, Series 2025-5C5 Class X-D(P) BBB (high) (sf)StbProvis.-New
    US
    08-Jul-25Commercial Mortgage Pass-Through Certificates, Series 2025-5C5 Class D(P) BBB (sf)StbProvis.-New
    US
    08-Jul-25Commercial Mortgage Pass-Through Certificates, Series 2025-5C5 Class X-E(P) BBB (low) (sf)StbProvis.-New
    US
    08-Jul-25Commercial Mortgage Pass-Through Certificates, Series 2025-5C5 Class E(P) BB (high) (sf)StbProvis.-New
    US
    08-Jul-25Commercial Mortgage Pass-Through Certificates, Series 2025-5C5 Class F-RR(P) B (high) (sf)StbProvis.-New
    US
    More
    Less
Wells Fargo Commercial Mortgage Trust 2025-5C5
  • Date Issued:Jul 8, 2025
  • Rating Action:Provis.-New
  • Ratings:(P) AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jul 8, 2025
  • Rating Action:Provis.-New
  • Ratings:(P) AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jul 8, 2025
  • Rating Action:Provis.-New
  • Ratings:(P) AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jul 8, 2025
  • Rating Action:Provis.-New
  • Ratings:(P) AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jul 8, 2025
  • Rating Action:Provis.-New
  • Ratings:(P) AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jul 8, 2025
  • Rating Action:Provis.-New
  • Ratings:(P) AA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jul 8, 2025
  • Rating Action:Provis.-New
  • Ratings:(P) A (high) (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jul 8, 2025
  • Rating Action:Provis.-New
  • Ratings:(P) A (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jul 8, 2025
  • Rating Action:Provis.-New
  • Ratings:(P) BBB (high) (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jul 8, 2025
  • Rating Action:Provis.-New
  • Ratings:(P) BBB (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jul 8, 2025
  • Rating Action:Provis.-New
  • Ratings:(P) BBB (low) (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jul 8, 2025
  • Rating Action:Provis.-New
  • Ratings:(P) BB (high) (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Jul 8, 2025
  • Rating Action:Provis.-New
  • Ratings:(P) B (high) (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.