Approximately $15.9 million of structured securities affected
New York, November 25, 2020 -- Moody's Investors Service, ("Moody's") has
confirmed the ratings on two classes and downgraded the rating on one
class in Wells Fargo Commercial Mortgage Securities, Inc.,
Commercial Mortgage Pass-Through Certificates, Series 2010-C1
as follows:
Cl. E, Confirmed at Ba2 (sf); previously on Apr 17,
2020 Ba2 (sf) Placed Under Review for Possible Downgrade
Cl. F, Confirmed at B3 (sf); previously on Apr 17,
2020 B3 (sf) Placed Under Review for Possible Downgrade
Cl. X-B*, Downgraded to Caa2 (sf); previously
on Apr 17, 2020 B1 (sf) Placed Under Review for Possible Downgrade
*Reflects Interest-Only Class
RATINGS RATIONALE
The ratings on the two P&I classes were confirmed due to the significant
deal paydowns, the expected principal recovery from the remaining
loan in the pool and the potential for increased interest shortfalls if
the loan is unable to refinance. The deal has paid down 96%
since securitization and as a result, the remaining P&I classes
have experienced a significant increase in credit support. However,
the sole remaining loan has passed its original maturity date in October
2020.
The rating on the IO Class (Cl. X-B) was downgraded due
to the decline in the credit quality of its reference classes resulting
from principal paydowns of higher quality reference classes.
This action concludes the reviews for downgrade initiated on April 17,
2020.
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.
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, defeasance or an improvement
in loan performance.
Factors that could lead to a downgrade of the ratings include a decline
in the performance of the remaining loan or an increase in interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating all classes except interest-only
classes was "Moody's Approach to Rating Large Loan and Single
Asset/Single Borrower CMBS" published in September 2020 and available
at https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_1190579.
The methodologies used in rating interest-only classes were "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower CMBS"
published in September 2020 and available at https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_1190579
and "Moody's Approach to Rating Structured Finance Interest-Only
(IO) Securities" published in February 2019 and available at https://www.moodys.com/viewresearchdoc.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 November 18, 2020 distribution date, the transaction's
aggregate certificate balance has decreased by 96% to $30.7
million from $735.9 million at securitization. The
certificates are collateralized by one mortgage loan that has now passed
its original loan maturity date and is on the master servicer's
watchlist. The trust has experienced approximately $1.7
million of losses from recently disposed loans which have impacted Cl.
G (not rated by Moody's).
The remaining loan is the First Tennessee Plaza and Cedar Ridge Loan (100%
of the pool), which is secured by two office properties in Knoxville,
Tennessee. The largest property is First Tennessee Plaza,
a 460,000 square foot (SF), 27-story office tower in
downtown Knoxville. The second property, Cedar Ridge,
is a smaller 90,000 SF, suburban office property also located
in Knoxville. As of September 2020, the properties were a
combined 86% leased, similar to past five years but below
the 91% occupancy at securitization. Through year-end
2019, the revenue of the properties has generally increased over
the past five years, however, the year-to-date
2020 revenue declined as a result of rent concessions and increased vacancy.
The properties also face near term lease rollover with approximately 18%
of the net rentable area (NRA) expiring by the end of 2021. The
loan did not pay off at its original October 2020 maturity date and a
short term forbearance agreement was recently executed as the borrower
is currently attempting to refinance the loan. The loan has continued
to make debt service payments through November 2020. Moody's LTV
and stressed DSCR are 133% and 0.86X, respectively.
As of the November 2020 remittance statement, cumulative interest
shortfalls were $243,777 and impact Cl. F.
Interest shortfalls may increase if the loan is unable to refinance.
Interest shortfalls are caused by special servicing fees, including
workout and liquidation fees, appraisal entitlement reductions (ASERs),
loan modifications and extraordinary trust expenses.
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
Matthew Halpern
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
