Wells Fargo plans to securitize a $716.3 million pool of commercial mortgages, according to Fitch Ratings.
The deal, called Wells Fargo Commercial Mortgage Trust 2015-SG, has an unusually high concentration of hotel properties: they account for 23.3% of the pool. By comparison, the hotel exposure in other CMBS rated by Fitch this year averaged 16.2%. Hotel loans have the highest probability of default in Fitch’s multi-borrower model.
Hotel properties are not the property type that the deal is the most exposed to however. The concentration of retail properties is even higher, at 35.8% of the pool. Office properties have the second and third highest concentrations of the pool.
Another factor setting this deal apart is the high amortization in the pool. It is scheduled to pay down by 14.5% of the initial balance prior to maturity; that’s above the averages amortization of 12.0% and 12.2% for deals rated by Fitch in 2014 and in 2015 to date, respectively.
Just 13 loans, representing 11.9% of the pool, pay only interest and no principal for their entire terms, while 23 loans representing 42.5% of the pool pay only interest for part of their terms. The remaining 36 loans in the pool are balloon loans.
Fitch assigned preliminary ratings of AAA’ to five tranches of super senior notes that benefit from 30% credit enhancement; a senior note tranche with lower credit enhancement of 24.25% also earned a AAA.’
At the junior level, the trust will offer BBB-’ rated notes that benefit from credit enhancement of 8%.
Wells Fargo, Citigroup, Morgan Stanley, Natixis Securities and SG Americas Securities are the underwriters.