Approximately $535.6 million of structured securities affected
New York, October 15, 2020 -- Moody's Investors Service, ("Moody's") has
affirmed the ratings on seven classes in Wells Fargo Commercial Mortgage
Trust 2018-C46 ("WFCM 2018-C46"), Commercial Mortgage
Pass-Through Certificates, Series 2018-C46 as follows:
Cl. A-1, Affirmed Aaa (sf); previously on Aug
30, 2018 Definitive Rating Assigned Aaa (sf)
Cl. A-2, Affirmed Aaa (sf); previously on Aug
30, 2018 Definitive Rating Assigned Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Aug
30, 2018 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed Aaa (sf); previously on Aug
30, 2018 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Aug
30, 2018 Definitive Rating Assigned Aaa (sf)
Cl. A-S, Affirmed Aa2 (sf); previously on Aug
30, 2018 Definitive Rating Assigned Aa2 (sf)
Cl. X-A*, Affirmed Aaa (sf); previously on
Aug 30, 2018 Definitive Rating Assigned Aaa (sf)
* Reflects interest-only classes
RATINGS RATIONALE
The ratings on the P&I classes were affirmed because the transaction's
key metrics, including Moody's loan-to-value (LTV)
ratio, Moody's stressed debt service coverage ratio (DSCR) and the
transaction's Herfindahl Index (Herf), are within acceptable
ranges.
The rating on the IO class was affirmed based on the credit quality of
the referenced classes.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to disrupt
economies and credit markets across sectors and regions. Our analysis
has considered the effect on the performance of commercial real estate
from the current weak US economic activity and a gradual recovery for
the coming months. Although an economic recovery is underway,
it is tenuous and its continuation will be closely tied to containment
of the virus. As a result, the degree of uncertainty around
our forecasts is unusually high. Stress on commercial real estate
properties will be most directly stemming from declines in hotel occupancies
(particularly related to conference or other group attendance) and declines
in foot traffic and sales for non-essential items at retail properties.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
Moody's rating action reflects a base expected loss of 7.4%
of the current pooled balance. Moody's base expected loss plus
realized losses is now 7.3% of the original pooled balance.
Moody's provides a current list of base expected losses for conduit
and fusion CMBS transactions on moodys.com at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's forward-looking
view of the likely range of performance over the medium term. Performance
that falls outside the given range can indicate that the collateral's
credit quality is stronger or weaker than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a significant
amount of loan paydowns or amortization, an increase in the pool's
share of defeasance or an improvement in pool performance.
Factors that could lead to a downgrade of the ratings include a decline
in the performance of the pool, loan concentration, an increase
in realized and expected losses from specially serviced and troubled loans
or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating all classes except interest-only
classes was "Approach to Rating US and Canadian Conduit/Fusion CMBS" published
in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1244778.
The methodologies used in rating interest-only classes were "Approach
to Rating US and Canadian Conduit/Fusion CMBS" published in September
2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1244778
and "Moody's Approach to Rating Structured Finance Interest-Only
(IO) Securities" published in February 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1111179.
Please see the list of ratings at the top of this announcement to identify
which classes are interest-only (indicated by the *).
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of these methodologies.
DEAL PERFORMANCE
As of the September 17, 2020 distribution date, the transaction's
aggregate certificate balance has decreased by less than 1% to
$687 million from $692 million at securitization.
The certificates are collateralized by 49 mortgage loans ranging in size
from less than 1% to 8% of the pool, with the top
ten loans (excluding defeasance) constituting 47% of the pool.
One loan, constituting 6% of the pool, has an investment-grade
structured credit assessment.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity.
Loan concentration has an important bearing on potential rating volatility,
including the risk of multiple notch downgrades under adverse circumstances.
The credit neutral Herf score is 40. The pool has a Herf of 30,
compared to 31 at securitization.
As of the September 2020 remittance report, loans representing 94%
were current or within their grace period on their debt service payments
and 3% were between 30 -- 59 days delinquent.
Twelve loans, constituting 21% of the pool, are on
the master servicer's watchlist, of which four loans,
representing 9% of the pool, indicate the borrower has requested
relief in relation to coronavirus impact on the property. The watchlist
includes loans that meet certain portfolio review guidelines established
as part of the CRE Finance Council (CREFC) monthly reporting package.
As part of Moody's ongoing monitoring of a transaction, the
agency reviews the watchlist to assess which loans have material issues
that could affect performance.
No loans have been liquidated from the pool. Two loans, constituting
3% of the pool, are currently in special servicing.
Both of the specially serviced loans have transferred to special servicing
since March 2020.
The largest specially serviced loan is the Medical Village At Pine Hills
Loan ($11.2 million -- 1.6% of the pool),
which is secured by a 57,623 square foot (SF) Class B medical office
building located in Orlando, Florida. As of March 2020,
the property was 92% occupied, the same as year-end
2019 and securitization. The loan is last paid through its June
2020 payment date and transferred to special servicing in August 2020
due to payment default. The borrower has requested payment relief
in relation to the coronavirus outbreak.
The other specially serviced loan is the 2415 Mission Street Loan ($9.4
million -- 1.4% of the pool), which is secured
by a 32,525 SF mixed use property in the Mission District of San
Francisco, California. The property contains 10,001
SF of residential space across 41 co-living units, 11,022
SF of ground floor retail, and 11,502 SF of storage.
The loan is last paid through its April 2020 payment date and transferred
to special servicing in July 2020 due to payment default.
Moody's has also assumed a high default probability for five poorly
performing loans, constituting 5.9% of the pool,
and has estimated an aggregate loss of $12.3 million (a
20% expected loss on average) from these specially serviced and
troubled loans. The largest troubled loan is the DoubleTree Rocky
Mount Loan ($12.0 million -- 1.7% of
the pool) which is secured by a 166-room full-service hotel
in Rocky Mount, North Carolina. Property performance has
declined since securitization as a result of a decline in room revenue.
The loan is last paid through its July 2020 payment date and the borrower
has requested payment relief in relation to the coronavirus outbreak.
The second largest troubled loan is the HIX Yosemite Loan ($9.4
million -- 1.4% of the pool) which is secured by a
91-room limited service hotel in Merced, California.
Property performance deteriorated in 2019 from 2018 as a result of a decline
in occupancy and room revenue. The third largest troubled loan
is the Staybridge Hotel Denver Tech Loan ($8.4 million --
1.2% of the pool) which is secured by a 128-room
limited service hotel in Centennial, Colorado. The borrower
requested payment relief in relation to the coronavirus outbreak,
which was approved by the servicer. The fourth largest troubled
loan is the Hilton Garden Inn Albuquerque Journal Loan ($7.9
million -- 1.1% of the pool) which is secured by a
94-room limited service hotel in Albuquerque, New Mexico.
The loan is last paid through its July 2020 payment date and the borrower
has requested payment relief in relation to the coronavirus outbreak.
Moody's received full year 2019 operating results for 97% of the
pool, and full or partial year 2020 operating results for 83%
of the pool (excluding specially serviced and defeased loans).
Moody's weighted average conduit LTV is 119%, compared
to 116% at securitization. Moody's conduit component
excludes loans with structured credit assessments, defeased and
CTL loans, and specially serviced and troubled loans. Moody's
net cash flow (NCF) reflects a weighted average haircut of 16%
to the most recently available net operating income (NOI). Moody's
value reflects a weighted average capitalization rate of 9.8%.
Moody's actual and stressed conduit DSCRs are 1.47X and 0.90X,
respectively, compared to 1.50X and 0.93X at securitization.
Moody's actual DSCR is based on Moody's NCF and the loan's
actual debt service. Moody's stressed DSCR is based on Moody's
NCF and a 9.25% stress rate the agency applied to the loan
balance.
The loan with a structured credit assessment is the Fair Oaks Mall Loan
($39.3 million -- 5.7% of the pool),
which represents a pari passu portion of a $169.5 million
senior mortgage. The property is also encumbered with an $82.5
million B-Note. The loan is secured by a 779,949 SF
portion of a 1.5 million SF enclosed super-regional mall
located in Fairfax, Virginia. The mall, which is sponsored
by a partnership between Taubman Centers and Olshan Properties,
was developed in 1980, expanded in 1986, and underwent $23.8
million of renovations between 2013-2014. The mall is anchored
by two Macy's locations (one of which is collateral), JC Penney,
Lord & Taylor, Dicks Sporting Goods, and Dave & Buster's.
Lord & Taylor is expected to close its store at the property due to
its recent filing for Chapter 11 bankruptcy reorganization. As
of June 2020, the collateral was 91% leased, compared
to 94% in 2019 and 92% at securitization. While property
performance has been stable since securitization, revenues have
been declining. The mall reopened in May 2020 after a temporary
closure as a result of the coronavirus outbreak. Moody's structured
credit assessment and stressed DSCR are a3 (sca.pd) and 1.55X,
respectively.
The top three conduit loans represent 18.9% of the pool
balance. The largest loan is The Ballantyne Loan ($55 million
-- 8.0% of the pool), which is secured by a 244
room, full-service hotel located in Charlotte, North
Carolina. The property is part of the Ballantyne Corporate Park
which is a 535-acre master-planned business park that includes
4.2 million SF of Class A office space. The hotel offers
resort style amenities including one outdoor swimming pool, three
indoor swimming pools, a full-service spa, two tennis
courts, multiple food & beverage outlets, and an 18-hole
golf course (non collateral) and golf school (non collateral).
The property was built in 2000 and underwent an extensive property improvement
plan ("PIP") in 2018 totaling approximately $11.9
million ($48,770 per room). While the hotel has outperformed
its competitive set, as of March 2020, the trailing twelve
month (TTM) occupancy and RevPAR were 63.3% and $101
compared to 72.7% and $119 for the TTM ending March
2019. Moody's LTV and stressed DSCR are 136% and 0.89X,
respectively, compared to 125% and 0.95X at securitization.
The second largest loan is the Town Center Aventura Loan ($40.0
million -- 5.8% of the pool), which represents
a pari passu portion of a $80.0 million first mortgage.
The loan is secured by a 186,138 SF grocery-anchored shopping
center in Aventura, Florida. The property is located immediately
south of Aventura Mall, a super-regional mall. The
property is anchored by Publix Super Markets (26% of the net rentable
area (NRA)) with a lease expiration in 2023 with two 5 year extension
options. As of June 2020, the property was 89% occupied,
compared to 87% in 2019 and 94% at securitization.
Moody's LTV and stressed DSCR are 129% and 0.74X,
respectively, compared to 121% and 0.78X at securitization.
The third largest loan is the Silver Spring Plaza Loan ($35 million
-- 5.1% of the pool), which is secured by a 242,823
SF Class A office building located in downtown Silver Spring, Maryland,
approximately 6.6 miles north of Washington, D.C.
The property was built in 1970 as a hotel and was renovated and converted
into an office building in 2001. As of June 2020, the property
was 84% occupied, compared to 92% in 2019 and 87%
at securitization. While NOI increased in 2019 from 2018,
the largest tenant, Social & Scientific Systems gave back 22,152
SF (9% of total NRA) in June 2020, but extended their lease
from August 2023 to March 2031. Moody's LTV and stressed DSCR are
123% and 1.67X, respectively, compared to 111%
and 0.98X at securitization.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
The analysis includes an assessment of collateral characteristics and
performance to determine the expected collateral loss or a range of expected
collateral losses or cash flows to the rated instruments. As a
second step, Moody's estimates expected collateral losses or cash
flows using a quantitative tool that takes into account credit enhancement,
loss allocation and other structural features, to derive the expected
loss for each rated instrument.
Moody's did not use any stress scenario simulations in its analysis.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Seth Glanzman
Associate Lead Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Romina Padhi
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
