Wells Fargo is marketing $988.4 million of securities backed by smaller commercial mortgage, but the collateral has many of the same features – namely credit barbelling, as many recent deals.
Wells Fargo Commercial Mortgage Trust 2015-C31 is backed by pool of 102 loans and the average loan size for the pool is $9.8 million; smaller; that compares with an average of $15 million for other conduits rated by Fitch Ratings this year.
Excluding the top 10 loans, the weighted average loan size for the pool is even lower, at $6.2 million. Smaller loans, particularly loans less than $2.0 million, have historically exhibited higher default and severity rates.
Moody's Investors Service and Fitch assigned 'Aaa'/ 'AAA’ ratings to the super senior notes with credit enhancement of 30% and 'Aa2'/ 'AAA' ratings to senior notes with credit enhancement of 25%. Moody's will not rate any of the subordinate notes offered by the trust.
Fitch assigned ratings ranging from 'AA-' to 'B-' on the class B through F notes on offer.
The largest loan is $70.0 million (7.1% of the pool balance) and the 10 largest loans represent 37.4% of the pool balance.
Like numerous recent deals, this one benefits from the inclusion of an investment grade loan, which helps reduce overall leverage. And portions of this loan, backed by 11 Madison Avenue in New York City, have served as collateral in three previous conduit and one single-asset CMBS. It makes up 3% of the WFCMT 2015-C31 pool.
The loan lowers the overall leverage in the pool to a weighted average loan-to-value ratio, as calculated by Moody’s, of 117.5%; without it, the WA LTV increases to 119.4%. Fitch said that, without this investment grade loan, it would have required higher subordination on the senior notes of approximately 25.8%. Its subordination requirement for a tranche currently rated ‘BBB-’ it would have increase to 8.6% from 8.375%.
The majority of the loans (91.1% of the pool balance) have a Moody’s LTV greater than 100%, including 34 loans (32.8% of the pool balance) with a Moody’s LTV between 110% and 120%, 24 loans (28.7% of the pool balance) with a Moody’s LTV between 120% and 130%, and 11 loans (15.1% of the pool balance) with a Moody’s LTV greater than 130%.
Of the four loans assigned a Moody’s LTV ratio above 140%, three have a Moody’s LTV ratio between 140% and 143%. The largest high LTV bucket loan is 745 Atlantic Avenue (7.1% of pool, 142.8% MLTV), which is secured by a Class A office building located in Boston, MA.
Over 65% of the loans pay only interest either for a period of the loan's term (45.5%) or for the entire term (20.5%). Moody's noted in the presale report that the amortization profile for the underlying assets is slightly weaker relative to recently conduit pools the rating agency rated.