Wells Fargo’s next offering of $1.18 billion of commercial mortgage bonds is secured primarily by real estate located in second- and third-tier markets.

More than half of the properties in WFCM 2015-C29 are in what are considered either "secondary" (38.9%) or "tertiary" (17.6%) markets, according to a Kroll Bond Ratings Agency presale report.

The pool’s primary market exposure of 43.5% is slightly lower than the average of the last 21 KBRA rated CMBS conduits (44.5%). Primary market exposure for these deals ranged from a low of 25.6% to a high of 64.8%. “Primary markets have diverse economies and favorable demographics that can better withstand fluctuations and downturns in the national economy than secondary and tertiary markets,” stated the Kroll presale.

Despite the lower exposure to primary market properties, however, the deal’s super senior notes will be rated at ‘AAA.’ This tranche benefits from subordination of 30%, in line with similar tranches of other conduits issued this year.

In total, the deal securitizes 133 loans that are worth $1.18 billion and are secured by 151 properties.  The loans have a weighted average (WA) life of 9.3 years with a WA coupon of 4.27%. The loans have WA loan-to-value (LTV) ratio, as calculated by Kroll, of 101.8%, which is below the average of the 21 CMBS conduits it has rated over the last six months. These transactions had in-trust KLTVs ranging from 96.8% to 106.4%, with an average of 102.8%.

Nearly half of the loans, or 65.8% of the pool, pay only interest for either a partial term (50 loans, 53.1%) or full-term (14 loans, 12.7%).

Wells Fargo Bank, Rialto Mortgage Finance, Silver Peak Real Estate Finance, Walker & Dunlop Commercial Property Funding I WF and National Cooperative Bank are the loan sellers.

The majority of the loans (99 loans, 73.6%) were used to refinance existing debt, the proceeds from 32 loans (24.1%) were used for property acquisitions and the remaining two loans (2.2%) were used to recapitalize the respective borrowers.

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