DBRS Confirms All Classes of Wells Fargo Commercial Mortgage Trust 2016-C37

DBRS Limited (DBRS) confirmed all classes of Commercial Mortgage Pass-Through Certificates, Series 2016-C37 issued by Wells Fargo Commercial Mortgage Trust 2016-C37 as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class X-D at A (low) (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (sf)
-- Class X-EF at BBB (sf)
-- Class F at BBB (low) (sf)
-- Class X-G at BBB (low) (sf)
-- Class G at BB (high) (sf)
-- Class X-H at BB (low) (sf)
-- Class H at B (high) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance. The collateral consists of 63 fixed-rate loans secured by 141 commercial and multifamily properties. As of the October 2018 remittance, there has been a collateral reduction of 1.4% since issuance, with all loans outstanding and a current trust balance of $739.7 million. At year-end (YE) 2017, the pool reported a weighted-average (WA) debt-service coverage ratio (DSCR) and debt yield of 1.82 times (x) and 10.2%, respectively, compared with the DBRS Term DSCR and DBRS Debt Yield for the pool at issuance of 1.68x and 9.2%, respectively. The top 15 loans, representing 58.9% of the pool balance, reported a WA YE2017 DSCR of 1.87x, which reflects a net cash flow (NCF) growth of 6.7% over the DBRS Term NCF figures derived at issuance. The partial-year 2018 financials for the top 15 loans (14 reporting) reflected a WA annualized DSCR of 1.98x, implying NCF growth of 3.1% over the YE2017 figures.

In addition to the overall healthy NCF growth from issuance, the pool also benefits from a high concentration of shadow-rated loans in the top 15, including Prospectus ID#1 - Hilton Hawaiian Village, Prospectus ID#2 - Quantum Park and Prospectus ID#4 - Potomac Mills, which combined account for 19.1% of the pool and were all shadow-rated investment grade at issuance. With this review, DBRS confirms that all three continue to exhibit characteristics in line with the investment-grade shadow ratings.

As of the October 2018 remittance, nine loans, representing 20.1% of the pool balance, are being monitored on the servicer’s watchlist. There are four loans, including two loans in the top 15, representing 8.5% of the pool balance, that are being monitored for non-performance related issues in deferred maintenance. The watchlisted loans reported a WA YE2017 DSCR of 1.44x, in line with the WA DBRS Term DSCR of 1.43x derived at issuance. In the analysis for this review, DBRS applied a conservative cash flow scenario for the watchlisted loans exhibiting increased credit risk from issuance.

Classes X-A, X-B, X-D, X-EF, X-G and X-H are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

All ratings will be subject to ongoing surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

As part of this review, DBRS has provided updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#1 - Hilton Hawaiian Village SR (7.1% of the pool balance)
-- Prospectus ID#2 - Quantum Park SR (7.0% of the pool balance)
-- Prospectus ID#4 - Potomac Mills SR (4.9% of the pool balance)
-- Prospectus ID#5 - Franklin Square III WL (4.2% of the pool balance)
-- Prospectus ID#9 - Hampton Inn Tropicana (3.4% of the pool balance)
-- Prospectus ID# 12 - The Lodge & Waterfall Park Apartments Portfolio WL (3.1% of the pool balance)
-- Prospectus ID# 27 - MacGregor Place (1.2% of the pool balance)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for the entire CMBS universe, as well as deal and loan-level commentary for all DBRS rated transactions.

Notes:
All figures are in U.S dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance, which can be found on dbrs.com under Methodologies & Criteria. For a list of the Structured Finance related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document on www.dbrs.com. Please note that not every related methodology listed under a principal Structured Finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrs.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.