Wells Fargo Commercial Mortgage Trust 2017-C39 Annual Review for Fiscal Year Ended December 31, 2023

For investors seeking to understand the Wells Fargo Commercial Mortgage Trust 2017-C39 (referred to as "the Trust"), this report offers a clear overview of its operations and key developments for the fiscal year ended December 31, 2023. We aim to make this complex financial information accessible and understandable for retail investors.

1. Business Overview: Understanding the Trust and Its Operations

The Wells Fargo Commercial Mortgage Trust 2017-C39 is not a traditional publicly traded company. Instead, it functions as a financial structure that holds a diversified pool of commercial real estate mortgage loans. Investors participate by purchasing bonds, often called "certificates," which derive their value from the cash flow generated by these underlying property loans. Essentially, the Trust owns these loans, collects payments from borrowers, and then distributes those payments to its bondholders.

What's in the Pool? The Trust's portfolio consists of mortgage loans secured by various commercial properties, not residential homes. These include:

• Office buildings: Such as loans tied to properties like 225 & 233 Park Avenue South and First Stamford Place.
• Shopping centers: Including Columbia Park Shopping Center and Lakeside Shopping Center.
• Hotels: For example, the Crowne Plaza JFK and a portfolio of Starwood Capital Group hotels.
• Other commercial properties: Such as university housing (University Center Chicago) and various other income-generating real estate assets.

While the initial composition in 2017 showed loans like 225 & 233 Park Avenue South representing about 6.2% and Lakeside Shopping Center 5.1% of the total assets, the proportional weight of these and other loans has shifted due to principal payments and any loan resolutions. Many of these loans are part of larger financing arrangements where the Trust holds a specific portion. Sometimes, the Trust holds an "equal standing" (pari passu) position alongside other lenders, or a "junior" (subordinate) position, which affects the order of repayment if a borrower defaults.

2. Management Discussion & Analysis (MD&A Highlights)

For a Commercial Mortgage-Backed Securities (CMBS) trust, the Management's Discussion and Analysis (MD&A) primarily focuses on the performance of the underlying collateral and significant events affecting the trust. This section provides key insights into the Trust's operations and financial condition.

• Servicer Transition: Effective March 1, 2023, Wells Fargo Bank, National Association, transitioned its role as the primary servicer for a significant portion of the Trust's loans to Trimont LLC. This change was part of a broader strategic decision by Wells Fargo to streamline its servicing operations. Trimont LLC, a recognized leader in commercial real estate loan servicing, now collects payments, manages borrower communications, and oversees property performance for these loans. This administrative change should maintain continuity in servicing quality.

3. Financial Health (Debt, Cash, and Liquidity)

• Trust Liabilities: The Trust's primary liabilities are the various classes of commercial mortgage pass-through certificates issued to investors. These certificates represent claims on the cash flows generated by the mortgage loans.
• Cash Flow and Liquidity: The Trust's liquidity directly depends on the timely receipt of principal and interest payments from the underlying mortgage loans. Cash collected from borrowers, after paying servicing fees and other administrative expenses, is distributed to certificate holders according to the payment priority specified in the pooling and servicing agreement. The Trust maintains various accounts for collecting and distributing funds, and for holding reserves for specific purposes (e.g., property taxes, insurance, or to cover temporary shortfalls).
• Credit Enhancement: The Trust's structural design incorporates credit enhancement mechanisms, primarily through subordination. This means junior certificate classes absorb losses before senior classes, providing a protective buffer. Additionally, servicers may make "servicer advances" to cover temporary shortfalls in principal and interest payments or property protection expenses, ensuring continuity of payments to senior certificate holders. The Trust's ability to meet its obligations to certificate holders relies on the collateral's performance and the effectiveness of these structural protections.

4. Key Risk Factors

Investors in the Trust's certificates face several inherent risks:

• Credit Risk: The primary risk is that borrowers may default on their mortgage loans, potentially leading to losses if the underlying property's value is insufficient to cover the outstanding debt.
• Interest Rate Risk: Changes in market interest rates can affect the value of the Trust's certificates and borrowers' ability to refinance their loans at maturity.
• Real Estate Market Risk: Economic downturns, oversupply, or shifts in demand for specific property types (e.g., office, retail) can negatively impact property values and cash flows, increasing default risk.
• Servicer Performance Risk: Effective loan management, especially for distressed loans, depends on the servicer's capabilities. While Trimont LLC is experienced, any operational issues could affect loan performance.
• Concentration Risk: While diversified, a significant downturn in a particular geographic region or property type where the Trust has substantial exposure could disproportionately impact performance.
• Prepayment Risk: While generally low in the current environment, unexpected prepayments can reduce the total interest the Trust receives and may require reinvestment at potentially lower rates.
• Liquidity Risk of Certificates: The secondary market for CMBS certificates can be illiquid, especially for lower-rated or smaller portions (tranches) of the certificates. This may affect an investor's ability to sell their certificates quickly or at a favorable price.

5. Future Outlook

Looking ahead to 2024, the Trust anticipates continued navigation of a dynamic commercial real estate landscape. The focus will remain on proactive loan management, particularly for loans approaching maturity or those in sectors facing ongoing challenges. The Trust expects to maintain its commitment to timely reporting and transparency, providing certificate holders with regular updates on portfolio performance and any significant developments. Overall performance will largely depend on broader economic conditions, interest rate trends, and the resilience of the commercial real estate market.

6. Competitive Position

As a securitization trust, Wells Fargo Commercial Mortgage Trust 2017-C39 functions as a passive investment vehicle. It holds and administers a pool of mortgage loans and does not engage in competitive business activities or hold a competitive position in the market like a traditional operating company. Its performance is driven by the credit quality and cash flow generation of its underlying commercial real estate collateral, rather than by market competition.