Morningstar DBRS Assigns Provisional Credit Ratings to WHARF Commercial Mortgage Trust 2025-DC

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the following classes of Commercial Mortgage-Pass Through Certificates, Series 2025-DC (the Certificates) to be issued by WHARF Commercial Mortgage Trust 2025-DC:

-- Class A at (P) AAA (sf)
-- Class B at (P) AA (low) (sf)
-- Class C at (P) A (sf)
-- Class D at (P) BBB (sf)
-- Class E at (P) BB (low) (sf)
-- Class HRR at (P) B (high) (sf)

All trends are Stable.

The single-asset/single-borrower transaction is collateralized by the borrower's leasehold interest in the approximately 2.2 million-square foot (sf) portion of the 3.3 million-sf, luxury, mixed-use development, The Wharf. The subject is situated along the Washington Channel in southwest Washington, D.C., spanning over a mile of waterfront. The collateral includes a diverse mix of assets with four office buildings, two retail components, a concert theater, three multifamily properties, two hotels, a marina, and two below-grade parking structures. In addition to the collateral, the broader development contains other non-collateral components, including one office building, two condominium buildings, two marinas, and two hotels.

As part of the District of Columbia's Anacostia Waterfront Initiative, the borrower-sponsor group, along with Hoffman & Associates and Madison Marquette, was selected in 2006 to undertake the redevelopment of the publicly owned waterfront land. With over two decades of design, planning, and execution, the project was delivered in two phases--Phase I in 2017 and Phase II in 2022--to create a unified waterfront area that attracts over eight million visitors per year. Phase I assets include Incanto; The Channel; several retail spaces, including The Anthem; Hyatt House; Hilton Canopy; three of the four office properties; and the first phase of the below-grade parking garage. Phase II added 783,576 sf of mixed-use space, including new office buildings, residential apartments, luxury condominiums, retail shops, and restaurants, further complementing Phase I and further cementing the subject as a destination for the city's residents as well as visitors. The subject achieved LEED Gold or Silver certification for individual buildings. The Wharf's sustainability features include onsite stormwater management, green and high-reflectance roofs, and biodiverse plantings, setting a high bar for sustainable waterfront developments.

The Wharf's ecosystem comprises various complementary property-type components. The Wharf's office and retail components comprise a large portion of the collateral, representing 62.6% of the Morningstar DBRS Net Cash Flow (NCF). Given the trophy status of the office collateral, the subject has received significant interest from top tenants, including prominent law firms and large corporations. The subject office commands some of the highest office rents in the Washington metropolitan area and has significantly benefited from the flight-to-quality in the D.C. market. Additionally, the office component includes five investment-grade-rated tenants, comprising 11.7% of the office net rentable area (NRA). The Wharf's retail component offers a diverse experience, complete with a concert venue, three Michelin Guide restaurants, and a James Beard Foundation Award-winning restaurant. As of February 2025, The Wharf's retail component was 92.1% leased. Retail performance is strong, with sales averaging approximately $780 per sf and a 10.8% occupancy cost on average as of YE2024. Retail sales at The Wharf increased by approximately 64.4% on average between 2022 and 2024.

The Wharf's remaining components make up 37.4% of the Morningstar DBRS NCF. The multifamily component features a total of 904 units with 568 market-rate units (62.8% of total units) and 336 affordable units (37.2% of total units) across three Class A apartment buildings: The Channel (501 units), The Tides (255 units), and Incanto (148 units). The multifamily component of the subject was 90.8% occupied as of the March 31, 2025, rent roll.

The Wharf offers a variety of hotel options that cater to all travelers, from business visitors to leisure tourists, and integrate well into the waterfront neighborhood. The two collateral hotels are performing well, with occupancy, average daily rate, and revenue per available room levels that have outperformed their respective STR, Inc. competitive set, indicating strong market positioning.

The garage components provide a total of 2,575 parking spaces (1,175 spaces available for public use) and are an integral part of the subject, given its significant number of visitors. The facilities are well integrated within the subject and are designed to handle high traffic volumes, ensuring access for all users including tenants, residents, and visitors. The Wharf Marina contains 218 floating wet slips, with a 100-slip liveaboard community that is currently 100% leased. The subject's marina is 10 feet to 15 feet deep and has 300 feet of alongside dockage.

Overall, Morningstar DBRS has a favorable view of the collateral's credit characteristics given its property quality, diversified cash flows, amenities, sustainability, and desirable location within Washington.

Morningstar DBRS' credit rating on the Certificates addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related principal distribution amounts, and the interest distribution amounts for the rated classes.

Morningstar DBRS' credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, yield maintenance premiums.

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 factor(s) 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) https://dbrs.morningstar.com/research/454196.

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 Single-Asset/Single-Borrower Ratings Methodology (February 28, 2025) https://dbrs.morningstar.com/research/448962.

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

With regard to due diligence services, Morningstar DBRS was provided with the Form ABS Due Diligence-15E (Form-15E), which contains a description of the information that a third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While due diligence services outlined in Form-15E do not constitute part of Morningstar DBRS' methodology, Morningstar DBRS used the data file outlined in the independent accountant's report in its analysis to determine the credit ratings referenced herein.

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

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of final credit ratings on the above-mentioned securities is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

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

DBRS, Inc.
22 West Washington Street
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 Commercial Mortgage Servicer Rankings (August 23, 2024)
https://dbrs.morningstar.com/research/438283
-- 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

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