Morningstar DBRS Downgrades Credit Ratings on Four Classes of Wells Fargo Commercial Mortgage Trust 2015-SG1

DBRS, Inc. (Morningstar DBRS) downgraded its credit ratings on four classes of Commercial Mortgage Pass-Through Certificates, Series 2015-SG1 issued by Wells Fargo Commercial Mortgage Trust 2015-SG1 as follows:

-- Class D to B (sf) from BBB (low) (sf)
-- Class E to C (sf) from B (sf)
-- Class F to C (sf) from CCC (sf)
-- Class X-E to C (sf) from B (high) (sf)

In addition, Morningstar DBRS confirmed its credit ratings on the following classes:

-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class X-A at AAA (sf)
-- Class PEX at A (low) (sf)

The trend on Class D remains Negative. There is no trend on Classes E, F, and X-E, as these classes have a credit rating that does not typically carry a trend in commercial mortgage-backed securities (CMBS) credit ratings. The trends on all remaining classes are Stable.

At the previous credit rating action in June 2024, Morningstar DBRS changed the trends on Classes D, E, and X-E to Negative from Stable because of increased concerns about several loans, including three specially serviced loans and eight loans that were identified as being at increased risk for maturity default. Since that time, two specially serviced loans have been disposed from the pool with losses in line with Morningstar DBRS' expectations and three new loans have transferred to special servicing, bringing the special servicing concentration to 26.3% as of the April 2025 reporting.

In the analysis for the subject credit rating action, Morningstar DBRS liquidated four of the five specially serviced loans, resulting in aggregate liquidated losses of $40.1 million, which would fully wipe out the balances of Classes F and G and would erode the majority of the balance of Class E. In addition, there are four loans (representing 7.4% of the pool) that Morningstar DBRS identified as having increased risk of maturity default given recent performance challenges, weakening submarket fundamentals, and unfavorable lending conditions for certain property types. For the loans with elevated refinance risk, Morningstar DBRS applied an elevated probability of default penalty and/or a stressed loan-to-value ratio in the analysis for this review. Should these or other loans default, or should performance for specially serviced loans deteriorate further, Morningstar DBRS' projected losses for the pool could increase, further supporting the credit rating downgrade and Negative trend on Class D.

The credit rating confirmations and Stable trends on Classes A-4, A-S, X-A, B, C, and PEX reflect the overall stable performance for the majority of the underlying collateral, as exhibited by a healthy weighted-average debt service coverage ratio (DSCR) of 2.25 times (x) based on the most recent financial reporting available. Nine loans, representing 8.7% of the pool, have been fully defeased. As the pool is in wind-down with all loans maturing by year-end, Morningstar DBRS has an overall positive outlook for the refinance prospects for most of the underlying loans.

As of the April 2025 remittance, 51 of the original 72 loans remained in the pool with an aggregate principal balance of $488.5 million, representing a collateral reduction of 31.8% since issuance as a result of loan repayment, scheduled loan amortization, and the liquidation of several loans. Pool losses to date have totaled $15.4 million, eroding nearly half of the first-loss Class G certificate. There are five loans, representing 26.3% of the pool, in special servicing.

Of the loans in special servicing, Patrick Henry Mall (Prospectus ID#1, 11.5% of the pool), which is secured by the fee-simple interest in one anchor box and the in-line retail space of a mid-tier regional mall in Newport News, Virginia, is the primary driver of Morningstar DBRS' projected liquidated losses. The mall's owner and operator, Pennsylvania Real Estate Investment Trust (PREIT), emerged from bankruptcy through rounds of corporate restructuring and consolidation in April 2024. The loan is scheduled to mature in July 2025 and has been in special servicing since March 2025, when PREIT advised the servicer that it would not be able to secure a replacement loan by the maturity date. The special servicer has obtained an updated appraisal value of $64.2 million as of May 2024, representing a nearly 60.0% decline from the issuance appraisal value of $155.0 million. The reported in-place cash flows have been precipitously below issuance levels since 2016, with cash flow declines leveling off in 2021 and 2022 before turning back to negative with the YE2023 reporting, when the net cash flow (NCF) was reported at $7.6 million, down from the Issuer's NCF of $9.5 million. Morningstar DBRS' analysis of this loan included a liquidation scenario based on a 15.0% haircut to the May 2024 appraised value, resulting in a loss severity approaching 45%.

The 580 Market loan (Prospectus ID#11, 3.2% of the pool) is secured by a 31,325-square-foot office building in San Francisco. The loan transferred to special servicing in February 2025 because of a monetary default. Performance has declined significantly over the last several reporting periods, with the YE2024 financials reporting a DSCR of 0.41x, compared with the YE2023 figure of 0.76x and the Issuer's DSCR of 1.83x. Similarly, according to the February 2025 rent roll, occupancy had declined to 38.4%, down precipitously from 53% at YE2024, 74% at YE2023, and 100% at issuance. Given the severe drop in performance since issuance, Morningstar DBRS analyzed a liquidation scenario based on a 50.0% haircut to the issuance appraisal, resulting in a loss severity of nearly 70%.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) at https://dbrs.morningstar.com/research/437781.

Classes X-A and X-E 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 credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

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

The principal methodology is North American CMBS Surveillance Methodology (February 28, 2025), https://dbrs.morningstar.com/research/448963.

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The Morningstar DBRS Long-Term Obligation Rating Scale definition indicates that credit ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' outlooks and credit ratings are monitored.

DBRS, Inc.
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Chicago, IL 60602 USA
Tel. +1 312 332-3429

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- North American CMBS Multi-Borrower Rating Methodology (April 9, 2025)/North American CMBS Insight Model v. 1.3.0.0, https://dbrs.morningstar.com/research/451739
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702
-- Legal Criteria for U.S. Structured Finance (December 3, 2024), https://dbrs.morningstar.com/research/444064
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.