DBRS Morningstar Confirms Classes and Maintains Trends on Wells Fargo Commercial Mortgage Trust 2015-LC20

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-LC20 issued by Wells Fargo Commercial Mortgage Trust 2015-LC20 as follows:

-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class X-B at A (sf)
-- Class C at A (low) (sf)
-- Class PEX at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class X-E at BB (sf)
-- Class E at BB (low) (sf)
-- Class X-F at B (sf)
-- Class F at B (low) (sf)

Classes E, F, X-E, and X-F have Negative trends. All other trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which remains in line with DBRS Morningstar expectations. At issuance, the transaction comprised 68 fixed-rate loans secured by 122 commercial properties with a trust balance of $829.6 million. Per the January 2022 remittance, 62 loans secured by 116 commercial properties remain in the pool with a trust balance of $721.7 million, representing a collateral reduction of 13.0% since issuance. As of the January 2022 remittance report, 11 loans, representing 26.6% of the trust balance are fully defeased, including the largest loan in the pool, 3 Columbus Circle (Prospectus ID#1, 10.4% of the trust balance).

The Negative trends primarily reflect DBRS Morningstar’s ongoing concerns regarding the eight loans in special servicing, representing 18.4% of the pool. Additionally, the pool is somewhat concentrated by property type, specifically types that have been sensitive to effects of the pandemic, as retail properties and hospitality properties represent 25.0% and 18.6% of the pool balance, respectively.

The largest specially serviced loan, One Monument Place (Prospectus ID#3, 4.5% of the trust balance), is secured by the fee interest in a 222,500-square-foot Class A office property in Fairfax, Virginia. The loan transferred to special servicing after failure to repay by the April 2020 maturity date. A forbearance agreement was executed in September 2021, the terms of which included a $5.0 million principal paydown, a loan extension to April 2023, and a conversion to interest-only (IO) payments. An additional $600,000 principal payment is due in May 2022. According to the November 2021 rent roll, the property was 38.5% occupied, down from 53% at year-end (YE) 2020, 67% at YE2019, 80% at YE2018, and 93.2% at issuance. The collateral was reappraised in July 2021 at a value of $29.2 million, which is below the senior debt amount. As of October 2021, $4.3 million of principal remained outstanding on the mezzanine debt.

The second-largest specially serviced loan, University of Delaware Hotel Portfolio (Prospectus ID#4, 4.4% of the trust balance), is secured by the fee interest in two adjacent hotels totaling 245 keys in close proximity to the main campus of the University of Delaware in Newark, New Jersey. Demand is largely reliant on campus events held at the athletic facilities, which are directly across the street from the collateral properties. The loan transferred to the special servicer in April 2020 at the borrower’s request as a result of the Coronavirus Disease (COVID-19) pandemic. A relief agreement has been executed, and a cash management account is being set up. The loan, which is current as of the January 2022 remittance, is expected to return to the master servicer in the near term. The borrower appears to be committed to the collateral properties, and DBRS Morningstar will continue to monitor the loan’s ongoing performance.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Classes X-A, X-B, X-E, and X-G are 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 ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#3–One Monument Place (4.5% of the pool)
-- Prospectus ID#4–University of Delaware Hotel Portfolio (4.4% of the pool)
-- Prospectus ID#9–Hilton Albany (3.0% of the pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is North American CMBS Surveillance Methodology (March 26, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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