Morningstar DBRS Confirms Credit Ratings on All Classes of Wells Fargo Commercial Mortgage Trust 2015-C31, Changes Trends on Six Classes to Stable

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2015-C31 issued by Wells Fargo Commercial Mortgage Trust 2015-C31 as follows:

-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class C at BBB (high) (sf)
-- Class PEX at BBB (high) (sf)
-- Class X-D at B (sf)
-- Class D at B (low) (sf)
-- Class E at C (sf)
-- Class F at C (sf)

Morningstar DBRS changed the trends on Classes B, C, D, X-B, X-D, and PEX to Stable from Negative. The trend on Classes A-3, A-4, A-SB, A-S, and X-A remains Stable. There are no trends for Classes E and F, which are assigned credit ratings that do not typically carry trends in commercial mortgage-backed securities (CMBS).

The credit rating confirmations reflect Morningstar DBRS' loss projections for the loans in special servicing, which remain contained to the Class E certificate, which is already at a C (sf) credit rating. As of the May 2025 remittance, there is a total of four specially serviced loans, representing 18.3% of the current pool balance. All of the specially serviced loans were analyzed with liquidation scenarios, with cumulative projected losses totaling nearly $60 million. The projected losses will erode only 10% of the outstanding principal in the Class E certificate, supporting the credit rating confirmations.

At the last review, the trends were changed to Negative on Classes B, C, D, X-B, X-D, and PEX to reflect the increased pool expected losses (EL) and Morningstar DBRS' concerns regarding increased default risk as the pool neared its maturity year. For this review, the trend changes to Stable from Negative reflect the repayment of several loans, including a loan that had an EL significantly higher than the pool average, decreasing the pool EL for this review. With this review, Morningstar DBRS identified five performing loans, representing 9.9% of the pool, that exhibit elevated refinance risk given performance concerns and weaker credit metrics. The weighted-average (WA) EL for these loans is more than 135% greater than the WA EL for the pool. Morningstar DBRS maintained and updated stressed loan-to-value ratios and/or elevated probabilities of default for these loans to reflect the elevated risk in the pool EL. In addition, updated appraisals for CityPlace I (Prospectus ID#3, 6.3% of the current pool balance) and Patrick Henry Mall (Prospectus ID#7, 3.0% of the current pool balance) were received that exceeded the Morningstar DBRS expectations at the last credit rating action, decreasing the cumulative projected losses from the liquidation scenarios for this review further supporting the change in trends to Stable from Negative.

As of the May 2025 remittance, 87 of the original 102 loans remain outstanding with a pool balance of $716.5 million, representing a collateral reduction of 27.5% since issuance. There are 57 loans on the servicer's watchlist, representing 63.8% of the pool balance, eight of these are being monitored for performance-related concerns, while the rest are flagged for upcoming maturities. The pool also benefits from a favorable property type concentration with loans backed by retail properties accounting for 27.8% of the pool, while office properties account for only 13.8% of the pool balance.

The largest loan in special servicing and largest contributor to Morningstar DBRS' liquidated loss projections is the Sheraton Lincoln Harbor Hotel (Prospectus ID#2, 8.2% of the current pool balance). The loan is secured by a 358-room, full-service hotel in Weehawken, New Jersey. The loan has a non-controlling pari passu piece in the CSAIL 2016-C5 transaction, which is also rated by Morningstar DBRS. The loan transferred to the special servicer in January 2021 for payment default and was subsequently foreclosed upon in March 2021 with a receiver appointed in April 2021. More recently, a purchase and sale agreement has been executed between the receiver and potential buyer with an anticipated closing date in the third quarter of 2025, ahead of its October 2025 maturity. Performance has improved since the receiver took possession, with the February 2025 STR reporting a trailing 12-month (T-12) occupancy, average daily rate (ADR), and revenue per available room (RevPAR) figures of 90.4%, $200.15, and $180.97, respectively, with a RevPAR penetration rate of 96.8%. For comparison, the March 2024 STR reported T-12 occupancy, ADR, and RevPAR figures of 90.0%, $189.75, and $170.77, respectively. The subject received an updated appraisal dated June 2024, which valued the property at $82.6 million, remaining in line with the June 2023 appraisal of $80.5 million, but ultimately well below the issuance value of $128.0 million. In the analysis for this review, Morningstar DBRS liquidated the loan from the trust based on a 25% haircut to the most recent appraised value in addition to including the outstanding advances and expected servicer expenses, which totaled nearly $15.7 million, resulting in an implied loss nearing 50.0%, or approximately $27.9 million.

The second-largest loan in special servicing is CityPlace I, which is secured by a 39-story, Class A office property totaling 884,366 square feet (sf), in downtown Hartford, Connecticut. The loan transferred to special servicing in October 2023 for imminent monetary default after the borrower indicated it would no longer be funding operating shortfalls. According to the most recent servicer commentary, the subject is generating interest from local developers interested in purchasing the asset. The lender has ordered an updated appraisal and has received proposals from CBRE and Marcus & Millichap for sales broker services. According to the most recent reporting, the property was 47.6% occupied as of September 2024, compared to 49.6% YE2023 and 86.0% YE2022. The significant drop in occupancy is attributable to the former largest tenant, UnitedHealthcare Services Inc, downsizing to 57,628 sf at its lease renewal in July 2023 from 377,624 sf. Backfilling vacant space will be a challenge given the subject's location in a softening office submarket, which according to Reis has reported vacancy rates in excess of 20.0% since 2022. An appraisal dated August 2024 valued the property at $64.0 million, representing a decline of 44.1% from the issuance value of $114.5 million. In the analysis for this review, Morningstar DBRS liquidated the loan from the trust based on a 25% haircut to the appraised value in addition to including the outstanding advances and expected servicer expenses, which totaled approximately $3.5 million. This analysis suggested a loss severity approaching 50.0%, or approximately $21.3 million.

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 at https://dbrs.morningstar.com/research/437781 (August 13, 2024).

Classes X-A, X-B, and X-D 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.

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.