Fitch Ratings has downgraded four classes and affirmed 11 classes of
The Rating Outlook of three classes are revised to Negative from Stable and two classes have Negative Outlooks as a result of downgrades of those classes.
RATING ACTIONS
Entity / Debt
Rating
Prior
WFCM 2017-RB1
A-4 95000TBR6
LT
AAAsf
Affirmed
AAAsf
A-5 95000TBS4
LT
AAAsf
Affirmed
AAAsf
A-S 95000TBU9
LT
AAAsf
Affirmed
AAAsf
A-SB 95000TBT2
LT
AAAsf
Affirmed
AAAsf
B 95000TBX3
LT
AA-sf
Affirmed
AA-sf
C 95000TBY1
LT
A-sf
Affirmed
A-sf
D 95000TAC0
LT
BBB-sf
Affirmed
BBB-sf
E 95000TBA3
LT
B-sf
Downgrade
BB-sf
E-1 95000TAE6
LT
BB+sf
Affirmed
BB+sf
Page
of 2
VIEW ADDITIONAL RATING DETAILS
KEY RATING DRIVERS
Increased Loss Expectations; Office Performance Concerns: Overall pool loss expectations have increased since Fitch's prior rating action, which is primarily driven by deteriorating performance of two office loans within the Top 15. Fitch's current ratings reflect a base case loss of 5.9%. Fitch has identified five loans (19.6% of the pool) as Fitch Loans of Concern (FLOCs), which includes two loans (7.0%) in special servicing. The downgrades and the Outlook revisions reflect the higher loss expectations for the Center West and 340 Bryant loans. In addition, office loans account for the largest concentration in the pool (15 loans or 53.4% of the pool), two of which are the largest contributors to the loss.
Fitch Loans of Concern: The largest increase in loss since the prior review is the Center West loan (7.3%), which is secured by a leasehold interest on a 351,789-sf CBD office property located in
Occupancy declined to 36.6% as of the
Fitch's modeled loss of approximately 22% reflects a cap rate of 9.75% and a 15% stress to the YE2021 NOI.
The second largest increase in loss is the 340 Bryant loan (2.7%), which is secured by a 62,270 sf, class B office building located in the heart of the SOMA district of
Fitch modeled a loss of 39% which reflects a recovery value of
The largest specially serviced loan is
Performance has been slowly improving since the pandemic lows. Occupancy improved to 65.4% as of TTM
Fitch's modeled loss of approximately 9% reflects a discount to a recent appraisal, which results in a recovery value of
Minimal Change in Credit Enhancement (CE): As of the
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Sensitivity factors that lead to downgrades include an increase in pool-level losses from underperforming or specially serviced loans. Downgrades to classes A-2, A-3, A-4, A-5, A-SB, A-S, B, X-A and X-B are not likely due to the position in the capital structure but may occur should interest shortfalls affect these classes. Downgrades to classes C, D and X-D are possible should expected losses for the pool increase significantly and/or one or more large loans incur an outsized loss, which would erode CE. Downgrades to classes E, E-1, E-2 and EF are possible if performance of the FLOCs, including specially serviced loans, fail to stabilize and/or additional loans default or transfer to special servicing. Further downgrade to class F and EF is possible if realized losses are realized.
Fitch has identified both a baseline and a worse-than-expected, adverse stagflation scenario based on fallout from the
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Sensitivity factors that lead to upgrades would include stable to improved asset performance, particularly on the FLOCs, coupled with additional paydown and/or defeasance. Upgrades to classes B, C, X-B and X-D would occur with significant improvement in CE and/or defeasance and with the stabilization of performance on the FLOCs; however, adverse selection and increased concentrations could cause this trend to reverse. An upgrade to class D would also take into consideration of these factors but would be limited based on sensitivity to concentrations or the potential for future concentration. Classes would not be upgraded above 'Asf' if interest shortfalls are likely. Upgrades to classes E, F, E-1, E-2 and EF are not likely until the later years in the transaction and only if the performance of the remaining pool is stable and if there is sufficient CE.
Best/Worst Case Rating Scenario
International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
Additional information is available on www.fitchratings.com
(C) 2023 Electronic News Publishing, source