Morningstar DBRS Downgrades Credit Ratings on Three Classes of Wells Fargo Commercial Mortgage Trust 2015-C28

DBRS, Inc. (Morningstar DBRS) downgraded its credit ratings on three classes of Commercial Mortgage Pass-Through Certificates, Series 2015-C28 issued by Wells Fargo Commercial Mortgage Trust 2015-C28 as follows:

-- Class D to CCC (sf) from BB (low) (sf)
-- Class E to C (sf) from CCC (sf)
-- Class X-E to C (sf) from CCC (sf)

In addition, Morningstar DBRS confirmed its credit ratings on the following classes:

-- Class C at A (low) (sf)
-- Class PEX at A (low) (sf)
-- Class F at C (sf)

Morningstar DBRS also changed the trends on Classes C and PEX to Stable from Negative. Classes D, E, F, and X-E have credit ratings that do not typically carry trends in commercial mortgage-backed securities (CMBS) transactions.

The credit rating downgrades reflect an increase in Morningstar DBRS' projected losses, stemming from the eight loans in special servicing (76.7% of the current pool balance), all of which Morningstar DBRS liquidated with this review. In the previous credit rating action in June 2024, there were only two loans in special servicing, which Morningstar DBRS liquidated at a combined projected loss of nearly $40.0 million. Since the previous credit rating action, one of those specially serviced loans, Washington Square (Prospectus ID#22), was liquidated from the trust with a realized loss of $5.6 million, below the $7.2 million Morningstar DBRS-projected loss. An additional seven loans transferred to special servicing with the May 2025 remittance, with all loans past the respective scheduled maturity dates. Morningstar DBRS' liquidation assumptions for these loans resulted in cumulative losses of $61.6 million, eroding the entirety of the balances on Classes F and G, as well as a majority of the balance on Class E, supporting the credit rating downgrade on Class E.

The seven loans that transferred to special servicing with the May 2025 remittance do not have updated property appraisals or defined servicer workout strategies at this time. In its analysis for these loans, Morningstar DBRS' liquidation assumptions considered conservative haircuts on the most recent appraised property values, which were most likely from issuance and do not reflect current property performance or market conditions. Given several of these assets are distressed and in default, it is likely these property values have declined since issuance. In the event future updated appraisals indicate additional value declines, Morningstar DBRS' loss projections may increase, supporting the credit rating downgrade on Class D.

With the May 2025 remittance, given the number of recent special servicing transfers, cumulative interest shortfalls increased to approximately $1.0 million and now affect Class E. With all remaining 12 loans past the scheduled maturity date, Morningstar DBRS notes that additional loans currently not in special servicing may transfer in the near future, increasing the probability that interest shortfalls may rise to Class D.

The credit rating confirmations on Classes C and PEX are supported by the conservative liquidation scenarios for all the loans based on stresses to the most recent appraised values to determine the recoverability of the remaining bonds. Morningstar DBRS' recoverability analysis suggests a full recovery of the principal balance on the Class C certificate is likely, supporting the credit rating confirmation and trend change on the class along with the corresponding exchangeable credit rating and trend on Class PEX.

Since the previous credit rating action, 70 loans have successfully repaid from the trust. As of the May 2025 remittance, the current trust balance was $180.1 million, representing a collateral reduction of 84.5% from issuance. Of the remaining loans, five loans representing 66.0% of the pool are secured by office collateral, followed by retail at 15.1%. There are four loans remaining in the trust that are not in special servicing; however, given that each failed to repay at scheduled maturity, Morningstar DBRS also analyzed these loans with liquidation scenarios.

The largest loan in the pool and in special servicing, 3 Beaver Valley Road (Prospectus ID#6, 19.6% of the pool), is secured by a 263,503-square-foot (sf) office building in Wilmington, Delaware. The loan transferred to the special servicer in December 2023 after the sole tenant, Farmers Insurance Exchange (Farmers; formerly 60.0% of the net rentable area (NRA)), withheld partial rental payments in response to a casualty event at the property that resulted in unusable space at the subject. The borrower advised it would not cover any payment shortfalls and foreclosure was later filed. In December 2024, a foreclosure sale transferred the title to the trust and, according to the servicer, the property is being prepared for sale. Farmers previously paid $1.4 million to reduce its space in 2022 and ultimately vacated the property at its December 2024 lease expiry date, leaving the property 100% vacant. There is currently a total of $1.1 million in reserves remaining across tenant, replacement, and other reserves. An updated appraisal dated February 2024 valued the property at $18.3 million; however, Farmers was still in occupancy at that time. Given the dark status, soft submarket, and the stringent lending environment for distressed office-backed loans, Morningstar DBRS liquidated this loan, applying a conservative 50% haircut to the February 2024 appraised value. Inclusive of additional fees totaling $2.4 million across liquidation fees and servicer advances, the resulting loan loss severity is in excess of 80.0%, or $28.5 million.

The loan with the second-highest Morningstar DBRS-expected loss is 3800 Embassy Parkway (Prospectus ID#16, 9.3% of the pool), which is secured by a 117,217-sf office property in Fairlawn, Ohio, approximately six miles from downtown Akron. The loan recently transferred to special servicing in May 2025 after the borrower failed to repay the loan at the May 2025 scheduled maturity. A decline in the occupancy rate to 77.8%, coupled with rising operating expenses, has caused the net cash flow to decrease to $1.5 million with a debt service coverage ratio of 1.4 times as of YE2024 financials. While there is no upcoming tenant rollover in the next 12 months, the two largest tenants, University Hospital (28.8% of the NRA, lease expiry in November 2026) and Buckingham, Doolittle & Burroughs, LLC (26.4% of the NRA, lease expiry in October 2026), have lease expirations in approximately 18 months, which is likely to affect the borrower's ability to refinance the loan. According to Reis, the non-central business district submarket of Akron reported an elevated Q1 2025 vacancy rate of 23.7%. Given the recent transfer to special servicing, potential significant tenant rollover risk, and soft submarket, Morningstar DBRS analyzed this loan with a liquidation scenario, applying a 60.0% haircut to the issuance appraised value. Inclusive of additional expenses totaling $2.0 million across liquidation fees and servicer advances, the resulting loan loss severity is in excess of 50.0%, or $9.0 million.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

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 factors 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) at https://dbrs.morningstar.com/research/454196.

Class X-E is an interest-only (IO) certificate that references a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

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 CMBS Surveillance Methodology (February 28, 2025) https://dbrs.morningstar.com/research/448963.

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

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

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The Morningstar DBRS Long-Term Obligation Rating Scale definition indicates that credit ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

DBRS, Inc.
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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 CMBS Multi-Borrower Rating Methodology (April 9, 2025)/North American CMBS Insight Model v. 1.3.0.0, https://dbrs.morningstar.com/research/451739
-- 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
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024),
https://dbrs.morningstar.com/research/438283

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