Wells Fargo securitizing $703m CMBS with significant retail concentration

Retail properties represent the highest property type concentration in this transaction, 31 loans or 38 percent of the pool, and a high concentrations of a single property type could lead to increased volatility, according to Fitch.

Fitch has assigned preliminary ratings to the $702.8 million Wells Fargo Commercial Mortgage Trust 2016-C34 transaction, backed by 68 fixed-rate loans on 92 properties.

wells-fargo-signThe ratings agency assigned the transaction’s seven senior classes as ‘AAAsf’ in a presale report. Retail properties represent the highest property type concentration in the transaction, 31 loans or 38 percent of the pool, and such a high concentration of a single property type could lead to increased volatility, according to Fitch.

The retail concentration is significantly above the agency’s year-to-date 2016 and full-year 2015 averages of 24.8 percent and 26.7 percent, respectively. The pool also has higher leverage than other recent Fitch-rated, fixed-rate multi-borrower transactions, with a pool LTV of 112.9 percent, above both the year-to-date 2016 average of 107.9 percent and full-year 2015 average of 109.3 percent.

But the report also shows that the top 10 loan concentration in this transaction (50.2 percent) is lower than the year-to-date 2016 average of 55.8 percent for other Fitch-rated U.S. multi-borrower deals.

Two loans (8.9 percent) are full-term interest only, 32 loans (52.1 percent) are partial interest only, and 10 loans (7.6 percent) have amortization schedules of 25 years or less. Fitch-rated transactions YTD 2016 have an average full-term interest-only percentage of 31.3 percent and a partial interest-only percentage of 41 percent. The two largest loans, Regent Medical portfolio (9.96 percent) and Congressional North Shopping Center & 121 Congressional Lane (8.4 percent) have additional subordinate debt in place.

The report also showed that the pool’s weighted average mortgage coupon is 5.09 percent, significantly below historical averages but greater than the year-to-date 2016 and full-year 2015 averages of 4.75 percent and 4.45 percent, respectively.

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