Morningstar DBRS Downgrades Credit Ratings on Two Classes of Wells Fargo Commercial Mortgage Trust 2015-NXS1, Confirms All Remaining Credit Ratings

DBRS, Inc. (Morningstar DBRS) downgraded its credit ratings on two classes of Commercial Mortgage Pass-Through Certificates, Series 2015-NXS1 issued by Wells Fargo Commercial Mortgage Trust 2015-NXS1 as follows:

-- Class F to CCC (sf) from B (sf)
-- Class X-F to CCC (sf) from B (high) (sf)

In addition, Morningstar DBRS confirmed the following credit ratings:

-- Class B at AA (sf)
-- Class X-B at A (high) (sf)
-- Class C at A (sf)
-- Class PEX at A (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class X-E at BB (sf)

All trends are Stable with the exception of Classes F and X-F, which have credit ratings that do not typically carry trends in commercial mortgage-backed securities (CMBS) credit ratings.

The credit rating downgrades reflect Morningstar DBRS' recoverability expectations for the remaining loans in the pool. Since the last credit rating action in June 2024, 37 loans have repaid from the pool, leaving 17 loans, seven of which, representing 46.2% of the pool, are in special servicing. Overall, the transaction has paid down 81.7% since issuance. As the pool continues to wind down, Morningstar DBRS looked to a recoverability analysis, the results of which suggest that losses would significantly erode the unrated Class G, leaving the rated Class F susceptible to losses should loan performance across the remaining loans continue to worsen. Morningstar DBRS concluded that the senior classes continue to be insulated from losses, the primary consideration in the confirmation of Class B through Class E.

Given the concentration of defaulted loans remaining, Morningstar DBRS' analysis considered conservative liquidation scenarios for all seven loans in special servicing, based on stresses to the most recent appraised values to determine the recoverability of the outstanding bonds. The analysis resulted in cumulative implied losses of approximately $24.6 million, contained to the unrated Class G, which has a current balance of $30.5 million.

The largest loan in special servicing, 760 & 800 Westchester Avenue (Prospectus ID#7, 18.4% of the pool), is secured by two Class A office properties in Rye Brook, New York. The loan is pari passu with the COMM 2015-PC1 Mortgage Trust (Morningstar DBRS-rated) and COMM 2015-DC1 transactions. The loan transferred to special servicing in April 2024 for imminent monetary default. Since then, the loan matured in November 2024, at which time the special servicer and borrower agreed to a two-year forbearance agreement through November 2026. The agreement includes a 12-month extension option through November 2027 provided the loan achieves a debt yield of 7%. As part of the forbearance, the borrower will deposit $1.9 million into an all-purpose reserve. The loan will remain in a cash flow sweep with excess cash flow to be deposited into the newly created reserve. Additionally, the loan will convert to interest only (IO) and be subject to default interest based on a default accrual rate of 0.50% that is scheduled to increase 50 basis points each year. However, all default interest above the default accrual rate will be forborne.

As of the December 2024 appraisal, the property was 80.9% occupied compared with 78.0% as of YE2023 and 90.0% at issuance. The loan will face elevated rollover risk as leases representing 17.4% of the net rentable area are scheduled to expire through YE2025. The rollover risk is compounded by weak submarket fundamentals as, according to a Q1 2025 Reis report, the Harrison/Rye/East office submarket reported an elevated vacancy rate of 24.9%. As of the YE2024 financials, the property generated net cash flow (NCF) of $6.0 million, equating to a debt service coverage ratio (DSCR) of 0.96 times (x). In comparison, the property generated an NCF of $6.6 million as of YE2023, equating to a DSCR of 1.06x.

An updated appraisal completed in December 2024 valued the property at $99.0 million, a 34.0% decline from the issuance appraised value of $151.0 million. In its analysis, Morningstar DBRS applied a 20.0% haircut to the most recent appraised value, resulting in a loss severity of approximately 20.0%.

Outside of the loans in special servicing, the remaining 10 loans in the pool are on the servicer's watchlist, predominantly for upcoming maturity risk; however, the majority of the loans are being monitored for being past their anticipated repayment dates (ARDs). Seven of the loans past their ARDs are secured by Walgreens properties that don't have a final maturity date until 2035. In addition, the 100 West 57th Street loan (Prospectus ID#6, 20.0% of the pool) is secured by a ground lease in Manhattan, New York, that has been extended to March 2046.

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 (May 16, 2025) at https://dbrs.morningstar.com/research/454196.

Classes X-B, X-E, X-F, and PEX are 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.