Fitch Assigns Final Ratings to Wells Fargo Commercial Mortgage Trust 2016-C34 Pass-Through Certs
OREANDA-NEWS. Fitch Ratings has assigned the following ratings and Rating Outlooks to Wells Fargo Commercial Mortgage Trust 2016-C34 Commercial Mortgage Pass-Through Certificates issued by Wells Fargo Bank, N.A.:
--$33,179,000 class A-1 'AAAsf'; Outlook Stable;
--$100,629,000 class A-2 'AAAsf'; Outlook Stable;
--$115,000,000c class A-3 'AAAsf'; Outlook Stable;
--$25,000,000ac class A-3FL 'AAAsf'; Outlook Stable;
--$0ac class A-3FX 'AAAsf'; Outlook Stable;
--$172,158,000 class A-4 'AAAsf'; Outlook Stable;
--$45,985,000 class A-SB 'AAAsf'; Outlook Stable;
--$35,139,000 class A-S 'AAAsf'; Outlook Stable;
--$527,090,000b class X-A 'AAAsf'; Outlook Stable;
--$36,018,000 class B 'AA-sf'; Outlook Stable;
--$36,018,000b class X-B 'AA-sf'; Outlook Stable;
--$36,896,000 class C 'A-sf'; Outlook Stable;
--$41,289,000a class D 'BBB-sf'; Outlook Stable;
--$20,205,000a class E 'BB-sf'; Outlook Stable;
--$20,205,000ab class X-E 'BB-sf'; Outlook Stable;
--$7,907,000a class F 'B-sf'; Outlook Stable.
(a) Privately placed and pursuant to Rule 144A.
(b) Notional amount and interest-only.
(c)The aggregate initial balance of class A-3, A-3FL and A-3FX certificates will be $140,000,000. Holders of the class A-3FL certificates may exchange all or a portion of their certificates for a like principal amount of class A-3FX certificates having the same pass-through rate as the class A-3FX regular interest.
Fitch does not rate the $20,205,000ab class X-FG certificates, $12,298,000a class G certificates, the $21,084,500a class H or the $21,084,500ab class X-H certificates.
The certificates represent the beneficial ownership interest in the trust, primary assets of which are 68 loans secured by 92 commercial properties having an aggregate principal balance of approximately $702.8 million as of the cut-off date. The loans were contributed to the trust by Wells Fargo Bank, N.A., Natixis Real Estate Capital LLC, Rialto Mortgage Finance, LLC, Silverpeak Real Estate Finance LLC, and Basis Real Estate Capital II, LLC.
Fitch reviewed a comprehensive sample of the transaction's collateral including site inspections on 74.5% of the properties by balance, cash flow analysis of 79.9%, and asset summary reviews on 100% of the pool.
KEY RATING DRIVERS
High Fitch Leverage: The pool has higher leverage statistics than other recent Fitch-rated, fixed-rate multiborrower transactions. The pool's Fitch debt service coverage ratio (DSCR) of 1.07x is below both the year-to-date (YTD) 2016 average of 1.17x and full-year 2015 average of 1.18x. The pool's Fitch loan-to-value (LTV) of 112.9% is above both the YTD 2016 average of 107.9% and full-year 2015 average of 109.3%.
Additional Subordinate Financing: Three loans (20.4% of the pool) have additional subordinate debt in place, including the two largest loans, Regent Portfolio (9.96% of the pool) and Congressional North Shopping Center & 121 Congressional Lane (8.4%). The pool's Fitch total debt DSCR and LTV of 1.04x and 115.2%, respectively, are worse than the YTD 2016 averages of 1.11x and 112%, respectively.
Retail Concentration: Thirty-one of the 68 loans in the transaction are completely are partially secured by retail properties. Retail properties represent 38.0% of the pool by balance, which is significantly above the YTD 2016 and full-year 2015 averages of 24.8% and 26.7%, respectively. No other property type accounts for more than 16.1% of the pool by balance.
For this transaction, Fitch's net cash flow (NCF) was 9.2% below the most recent net operating income (NOI; for properties for which a recent NOI was provided, excluding properties that were stabilizing during this period). Unanticipated further declines in property-level NCF could result in higher defaults and loss severities on defaulted loans and could result in potential rating actions on the certificates.
Fitch evaluated the sensitivity of the ratings assigned to WFCM 2016-C34 certificates and found that the transaction displays average sensitivity to further declines in NCF. In a scenario in which NCF declined a further 20% from Fitch's NCF, a downgrade of the senior 'AAAsf' certificates to 'BBB+sf' could result. In a more severe scenario, in which NCF declined a further 30% from Fitch's NCF, a downgrade of the senior 'AAAsf' certificates to 'BBB-sf' could result. The presale report includes a detailed explanation of additional stresses and sensitivities on pages 10-11.
DUE DILIGENCE USAGE
Fitch was provided with third-party due diligence information from Deloitte & Touche LLP. The third-party due diligence information was provided on Form ABS Due Diligence-15E and focused on a comparison and re-computation of certain characteristics with respect to each of the 68 mortgage loans. Fitch considered this information in its analysis and the findings did not have an impact on the analysis. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link at the bottom of the related rating action commentary.