Fitch to Rate Wells Fargo Commercial Mortgage Trust 2016-BNK1

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has issued a presale report on Wells Fargo Commercial Mortgage Trust 2016-BNK1 commercial mortgage pass-through certificates, series 2016-BNK1.

Fitch expects to rate the transaction and assign Rating Outlooks as follows:

--$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.

The following classes are not expected to be rated:

--$31,013,795ab class X-G.

--$31,013,795a class G.

--$43,527,883ac RRI Interest.

a)Privately placed pursuant to Rule 144A.

b)Notional amount and interest-only.

c)Vertical credit risk retention interest representing 5.0% of pool balance (as of the closing date).

The expected ratings are based on information provided by the issuer as of Aug. 1, 2016.

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 DSCR and Fitch LTV of 1.22x and 100.5%, respectively, are better than the 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 ten 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.

RATING SENSITIVITIES

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.

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 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

Related Research

Wells Fargo Commercial Mortgage Trust 2016-BNK1

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=885790

Wells Fargo Commercial Mortgage Trust 2016-BNK1 -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=885906

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1009773

ABS Due Diligence Form 15E 1

https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=1009773&flm_nm=15e_1009773_1.pdf

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1009773

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/20160801005742/en/

Fitch Ratings
Primary Analyst
Derek Shimeck
Associate Director
+1-312-368-3192
Fitch Ratings, Inc.
70 W Madison St.
Chicago, IL 60602
or
Secondary Analyst
Charles MacKenzie
Analyst
+1-212-908-0532
or
Committee Chairperson
Lauren Cerda
Senior Director
+1-312-606-2317
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
[email protected]
Hannah James, +1 646-582-4947
[email protected]

Source: Fitch Ratings

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