CHICAGO--(BUSINESS WIRE)--Fitch Ratings has issued a presale report on the Wells Fargo Commercial Mortgage Trust 2016-C36 commercial mortgage pass-through certificates.
Fitch expects to rate the transaction and assign Rating Outlooks as follows:
--$41,947,000 class A-1 'AAAsf'; Outlook Stable;
--$39,657,000 class A-2 'AAAsf'; Outlook Stable;
--$220,000,000 class A-3 'AAAsf'; Outlook Stable;
--$250,203,000 class A-4 'AAAsf'; Outlook Stable;
--$48,917,000 class A-SB 'AAAsf'; Outlook Stable;
--$77,236,000 class A-S 'AAAsf'; Outlook Stable;
--$600,724,000b class X-A 'AAAsf'; Outlook Stable;
--$120,145,000b class X-B 'AA-sf'; Outlook Stable;
--$42,909,000 class B 'AA-sf'; Outlook Stable;
--$36,473,000 class C 'A-sf'; Outlook Stable;
--$41,836,000ab class X-D 'BBB-sf'; Outlook Stable;
--$41,836,000a class D 'BBB-sf'; Outlook Stable;
--$9,118,000ac class E-1 'BB+sf'; Outlook Stable;
--$9,118,000ac class E-2 'BB-sf'; Outlook Stable;
--$18,236,000ac class E 'BB-sf'; Outlook Stable;
--$8,582,000ac class F 'B-sf'; Outlook Stable;
--$26,818,000ac class EF 'B-sf'; Outlook Stable.
The following classes are not expected to be rated:
--$4,291,000ac class F-1;
--$4,291,000ac class F-2;
--$6,098,000ac class G-1;
--$6,098,000ac class G-2;
--$12,196,000ac class G;
--$39,014,000ac class EFG;
--$9,992,979ac class H-1;
--$9,992,979ac class H-2;
--$19,985,958ac class H.
a) Privately placed pursuant to Rule 144A.
b) Notional amount and interest-only.
c) The class E-1 and E-2 certificates may be exchanged for a related amount of class E certificates, and the class E certificates may be exchanged for a ratable portion of class E-1 and E-2 certificates. Additionally, a holder of class E-1, E-2, F-1 and F-2 certificates may exchange such classes of certificates (on an aggregate basis) for a related amount of class EF certificates, and a holder of class EF certificates may exchange that class EF for a ratable portion of each class of the class E-1, E-2, F-1 and F-2 certificates. A holder of class E-1, E-2, F-1, F-2, G-1 and G-2 certificates may exchange such classes of certificates (on an aggregate basis) for a related amount of class EFG certificates, and a holder of class EFG certificates may exchange that class EFG for a ratable portion of each class of the class E-1, E-2, F-1, F-2, G-1 and G-2 certificates
The expected ratings are based on information provided by the issuer as of Oct. 18, 2016.
The certificates represent the beneficial ownership interest in the trust, primary assets of which are 73 loans secured by 98 commercial properties having an aggregate principal balance of $858,177,959 as of the cut-off date. The loans were contributed to the trust by Barclays Bank PLC, Wells Fargo Bank, National Association, C-III Commercial Mortgage LLC, Rialto Mortgage Finance, LLC, National Cooperative Bank, N.A., The Bancorp Bank, and Basis Real Estate Capital II, LLC.
Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 83.1% of the properties by balance and asset summary reviews and cash flow analysis of 83.9% 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 DSCR and Fitch LTV of 1.38x and 101.5%, respectively, are better than the YTD 2016 average Fitch DSCR and Fitch LTV of 1.19x and 105.8%, respectively. Only 3.1% of the pool has a Fitch Stressed DSCR below 1.00x, better than the YTD 2016 average of 22.9%. Excluding credit opinion loans and loans secured by multifamily cooperative properties, the pool's Fitch DSCR and Fitch LTV is 1.20x and 110.2%, respectively.
Co-Op Collateral: The pool contains 10 loans (8.4%) secured by multifamily cooperatives. Nine of the co-ops are located within the greater New York City metro area, with the remaining co-op located in Suffolk County, Long Island. The weighted average Fitch DSCR and Fitch LTV of the co-op loans are 2.91x and 54.1%, respectively.
Investment Grade Credit Opinion Loans: Two of the loans in the pool, Easton Town Center (5.2%) and Gas Company Tower & World Trade Center Parking Garage (1.7%) have investment-grade credit opinions. Easton Town Center has an investment-grade credit opinion of 'A+sf*' on a stand-alone basis, and Gas Company Tower & World Trade Center Parking Garage has an investment-grade credit opinion of 'Asf*' on a stand-alone basis. The two loans have a weighted average Fitch DSCR and Fitch LTV of 1.64x and 54.3%, respectively.
For this transaction, Fitch's net cash flow (NCF) was 8.8% 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-C36 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 'A-sf' 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 'BBBsf' 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 due diligence information from Deloitte & Touche, LLP. The due diligence 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 our 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.
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 31, 2016.
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 18 Aug 2016)
Criteria for Analyzing Multiborrower U.S. and Canadian Commercial Mortgage Transactions (pub. 01 Jul 2016)
Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
Rating Criteria for Structured Finance Servicers (pub. 01 Jul 2016)
Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)
U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)
Wells Fargo Commercial Mortgage Trust 2016-C36
Wells Fargo Commercial Mortgage Trust 2016-C36 Appendix
Dodd-Frank Rating Information Disclosure Form
ABS Due Diligence Form 15E 1
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