Wells Fargo is marketing its second commercial mortgage securitization in two months, this time with a focus on smaller-market retail, hotel and office properties.

Wells Fargo Commercial Mortgage Trust 2016-C35 is a $1.022 billion collateral pool of mortgage-backed bonds divided into 16 classes of notes. According to a registration filing, Wells Fargo will issue $883.5 million of the notes in the transaction expected to close July 28.

Both Fitch Ratings and Kroll Bond Rating Agency have affixed provisional ‘AAA’ ratings on the four super senior note tranches totaling more than $716 million. The asset-backed package also include three series of interest-only notes and seven tranches of subordinate notes.

The portfolio consists of 102 fixed-rate loans for 140 properties owned by 93 sponsors. All the loans have principal balances between $1.2 million and $64.5 million, with most having a 10-year tenor and a weighted average interest rate of 4.77%. Nearly all the loans (99) are secured by fee interests of the mortgaged properties located in 35 states.

Compared to other recent CMBS conduits (as well as Wells’ prior 2016-C34 securitization in May), the collateral pool has a larger-than-average share (73.8%) of properties located in what smaller “secondary” and “tertiary” markets. The inclusion of only 26.2% of the portfolio of primary market properties  is among the lowest recently rated deals, according to KBRA.

The largest loans in the collateral pool include the Epps Bridge Centre shopping center in Athens, Ga. with a $65.4 million loan, and Salem, N.H.-based The Mall at Rockingham Park in Salem, Mass., which took out a $60 million loan.

Both ratings agencies cited the increased diversity of loans in the mix, with the top 10 loans comprising only 40.4% of the collateral pool – the lowest of the 15 CMBS deals KBRA has rated since January.

KBRA rated the loan-to-value ratio of the loan pool at 98.2%, slight below the average of 100.2% for the 15 previous deals it has rated in the market this year.

The industry segments in the pool include 33.7% retail properties, 19.9% hotel and lodging, 11.8% multifamily and 11.7% office properties.

Fitch rated the loan-to-value ratio higher at 105.2%, as well as a debt service coverage ratio of 1.32x.

The loans in the pool were handed over to the trust from seven originators/sellers: Wells Fargo, Mortgage Finance LLC, Barclays Bank, UBS Real Estate Securities; C-III Commercial Mortgage LLC, Basis Real Estate Capital II LLC and National Cooperative Bank.

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