Fitch Assigns Final Ratings to Wells Fargo Commercial Mortgage P-T Certificates, Series 2016-C35

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has assigned the following ratings and Rating Outlooks to the Wells Fargo Bank N.A. Commercial Mortgage Pass Through Securities, Series 2016-C35.

--$47,834,000 class A-1 'AAAsf'; Outlook Stable;

--$58,672,000 class A-2 'AAAsf'; Outlook Stable;

--$265,000,000 class A-3 'AAAsf'; Outlook Stable;

--$227,377,000c class A-4 'AAAsf'; Outlook Stable;

--$67,132,000 class A-SB 'AAAsf'; Outlook Stable;

--$69,045,000 class A-S 'AAAsf'; Outlook Stable;

--$785,060,000b class X-A 'AAAsf'; Outlook Stable;

--$49,865,000 class B 'AA-sf'; Outlook Stable;

--$48,587,000 class C 'A-sf'; Outlook Stable;

--$50,000,000ac class A-4FL 'AAAsf'; Outlook Stable;

--$0ac class A-4FX 'AAAsf'; Outlook Stable;

--$56,258,000ab class X-D 'BBB-sf'; Outlook Stable;

--$56,258,000a class D 'BBB-sf'; Outlook Stable;

--$21,736,000a class E 'BBsf'; Outlook Stable;

--$11,508,000a class F 'Bsf'; Outlook Stable.

(a) Privately placed and pursuant to Rule 144A.

(b) Notional amount and interest-only.

(c) The aggregate initial balance of class A-4, A-4FL, and A-4FX certificates will be $277,377,000. Under certain circumstances, holders of the Class A-4FL Certificates may exchange all or a portion of their certificates for an equal certificate amount of the Class A-4FX Certificates having the same Pass-Through Rate as the Class A-4FX regular interest.

Fitch does not rate the $98,452,000 class X-B certificates or the $49,865,609 class G certificates.

Since Fitch issued its expected ratings on July 12, 2016, the balance of the class A-4 has decreased from $277,377,000 to $227,377,000. The $50,000,000 class A-4FL certificates and $0 class A-4FX certificates were added to the structure. 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 102 loans secured by 140 commercial properties having an aggregate principal balance of approximately $1.02 billion as of the cut-off date. The loans were contributed to the trust by Rialto Mortgage Finance, LLC, Barclays Bank PLC, Wells Fargo Bank, National Association, UBS Real Estate Securities Inc., C-III Commercial Mortgage LLC, National Cooperative Bank, N.A., and Basis Real Estate Capital II, LLC.

Fitch reviewed a comprehensive sample of the transaction's collateral including site inspections on 65.0% of the properties by balance, cash flow analysis of 73.3%, and asset summary reviews on 73.3% of the pool.

KEY RATING DRIVERS

Higher Leverage than Recent Transactions: The pool's Fitch weighted average DSCR and LTV are 1.32x and 105.2%, respectively. However, excluding co-op and credit opinion collateral, the pool's weighted average Fitch DSCR and LTV are 1.12x and 112.2%, respectively. This is higher than other recent Fitch-rated transactions. The 2015 and YTD 2016 averages Fitch LTVs were 109.3% and 107.5%, respectively. The 2015 and YTD 2016 averages Fitch DSCRs were 1.18x and 1.17x, respectively.

Co-Op Collateral: The pool contains 11 loans (5.6% of the pool) secured by multifamily co-ops; 10 are in the New York City metro area and one is in New Haven, CT. The weighted average Fitch DSCR and LTV of the co-op collateral in this transaction as rentals are 4.17x and 47.1%, respectively.

Pool Concentration Better than Recent Deals: The top 10 loans comprise 40.4% of the pool, which is below the YTD 2016 and 2015 averages of 55.4% and 49.3%, respectively. Additionally, the loan concentration index (LCI) and sponsor concentration index (SCI) are 250 and 265, respectively, well below the YTD 2016 LCI and SCI averages of 428 and 491 and the 2015 LCI and SCI averages of 367 and 410, respectively.

RATING SENSITIVITIES

For this transaction, Fitch's net cash flow (NCF) was 16.1% 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-C35 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 '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 102 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.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 18 Jul 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884963

Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 27 Aug 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=870009

Criteria for Analyzing Multiborrower U.S. and Canadian Commercial Mortgage Transactions (pub. 01 Jul 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=882237

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=882401

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=883130

Rating Criteria for Structured Finance Servicers (pub. 01 Jul 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884140

Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=735382

U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873395

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1009668

ABS Due Diligence Form 15E 1

https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=1009668&flm_nm=15e_1009668_1.pdf

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1009668

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160728006696/en/

Fitch Ratings
Primary Analyst
David Purinton, CFA
Associate Director
+1-312-368-3204
Fitch Ratings, Inc.
70 West Madison Street.
Chicago, IL 60602
or
Secondary Analyst
Rachel Chung
Analyst
+1-646-582-4905
or
Committee Chairperson
Lauren Cerda
Senior Director
+1-312-606-2317
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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