Fitch Assigns Final Ratings to Wells Fargo Commercial Mortgage Trust 2016-BNK1 P-T Certificates
--$36,136,000 class A-1 'AAAsf'; Outlook Stable;
--$230,000,000 class A-2 'AAAsf'; Outlook Stable;
--$267,018,000 class A-3 'AAAsf'; Outlook Stable;
--$45,766,000 class A-SB 'AAAsf'; Outlook Stable;
--$67,197,000 class A-S 'AAAsf'; Outlook Stable;
--$578,920,000b class X-A 'AAAsf'; Outlook Stable;
--$150,933,000b class X-B 'A-sf'; Outlook Stable;
--$44,452,000 class B 'AA-sf'; Outlook Stable;
--$39,284,000 class C 'A-sf'; Outlook Stable;
--$39,284,000ab class X-D 'BBB-sf'; Outlook Stable;
--$18,608,000ab class X-E 'BB-sf'; Outlook Stable;
--$8,271,000ab class X-F ' B-sf'; Outlook Stable;
--$39,284,000a class D 'BBB-sf'; Outlook Stable;
--$18,608,000a class E 'BB-sf'; Outlook Stable;
--$8,271,000a class F 'B-sf'; Outlook Stable.
A) Privately placed pursuant to Rule 144A.
B) Notional amount and interest-only.
C) Vertical credit risk retention interest representing 5% of pool balance (as of the closing date).
Fitch does not rate the $31,013,795a class G, $31,013,795ab class X-G, or $43,527,883.97ac RRI Interest. The classes above reflect the final ratings and deal structure.
The certificates represent the beneficial ownership interest in the trust, primary assets of which are 40 loans secured by 46 commercial properties having an aggregate principal balance of $870,557,680 as of the cut-off date. The loans were contributed to the trust by Wells Fargo Bank, National Association, Bank of America, National Association, and Morgan Stanley Mortgage Capital Holdings LLC.
Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 85.6% of the properties by balance, asset summary reviews on 100.0% of the pool, and cash flow analysis on 88.7% of the pool.
KEY RATING DRIVERS
Lower Fitch Leverage: The pool's leverage statistics are lower than those of other recent Fitch-rated, fixed-rate multiborrower transactions. The pool's Fitch debt service coverage ratio (DSCR) and Fitch loan to value (LTV) of 1.22x and 100.5%, respectively, are better than the year-to-date (YTD) 2016 average Fitch DSCR and Fitch LTV of 1.16x and 107.5%, respectively. Excluding credit-opinion loans, the pool's Fitch DSCR and Fitch LTV is 1.18x and 108.9%, respectively.
Investment-Grade Credit Opinion Loans: The two largest loans in the pool, The Shops at Crystals (9.2% of the pool) and Vertex Pharmaceutical HQ (9.2% of the pool), have investment grade credit opinions. The Shops at Crystals has an investment-grade credit opinion of 'BBB+sf*' on a stand-alone basis. Vertex Pharmaceutical HQ has an investment-grade credit opinion of 'BBB-sf*' on a stand-alone basis. The two loans have a weighted average Fitch DSCR and Fitch LTV of 1.41x and 62.7%, respectively.
Higher Pool Concentration: The top 10 loans comprise 58.7% of the pool, which is greater than the YTD 2016 average of 54.6% and 49.3%. The pool's loan concentration index (LCI) is 471, which is above the YTD 2016 average of 420. Additionally, the resulting sponsor concentration index (SCI) delta compared to the LCI is 23.4%, which is above the YTD 2016 average delta of 16.7%. Simon Property Group, L. P. (rated 'A'/F1') is the sponsor of two of the top 10 loans, representing 13.5% of the pool.
For this transaction, Fitch's net cash flow (NCF) was 19.6% below the most recent year's net operating income (NOI; for properties for which a full-year 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 in potential rating actions on the certificates.
Fitch evaluated the sensitivity of the ratings assigned to WFCM 2016-BNK1 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 junior 'AAAsf' certificates to 'Asf' could result. In a more severe scenario, in which NCF declined a further 30% from Fitch's NCF, a downgrade of the junior 'AAAsf' certificates to 'BBB+sf' could result. The presale report includes a detailed explanation of additional stresses and sensitivities on page 11.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
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 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 contained on the bottom of the related rating action commentary (RAC).
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and enforcement mechanisms ("RW&Es") that are disclosed in the offering document and which relate to the underlying asset pool is available by accessing the appendix referenced under "Related Research" below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the special report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions,' dated May 2016.