DBRS Finalizes Ratings on GSMS 2013-GC10

DBRS has today assigned final ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2013-GC10 (the Certificates) issued by GS Mortgage Securities Trust 2013-GC10. The trends are Stable.

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (sf)
-- Class E at BB (sf)
-- Class F at B (sf)

Classes X-B, B, C, D, E and F have been privately placed pursuant to Rule 144A.

The Class X-A and Class X-B balances are notional. DBRS ratings on interest-only certificates address the likelihood of receiving interest based on the notional amount outstanding. DBRS considers the interest-only certificate’s position within the transaction payment waterfall when determining the appropriate rating.

The collateral consists of 61 fixed-rate loans secured by 93 commercial properties. The transaction has a balance of $859,381,941. The pool consists of relatively low-leverage financing, with a DBRS weighted-average term debt service coverage ratio (DSCR) and debt yield of 1.56 times (x) and 9.4%, respectively. The pool is relatively diverse in terms of location, loan size and property, with a concentration level equivalent to a pool of 19 equal-sized loans.

Loans secured by hotels represent 19.9% of the pool, including three of the largest ten loans. Hotel properties have higher cash flow volatility than traditional property types because their income, which is derived from daily contracts rather than multi-year leases, and their expenses, which are often mostly fixed, are quite high as a percentage of revenue. These two factors cause revenue to fall swiftly during a downturn and cash flow to fall even faster because of the high operating leverage. The DBRS sample included 27 loans, representing 74.8% of the pool. A relatively high percentage of properties from the DBRS sample were classified as Above Average or Excellent (50.8% of the sample, 38.0% of the pool), above the respective figures for other recently rated DBRS conduit transactions. In addition, the pool is concentrated in urban markets, which represent 25.7% of the pool, which benefit from consistent investor demand even in times of stress.

The ratings assigned to the Certificates by DBRS are based exclusively on the credit provided by the transaction structure and underlying trust assets. All classes will be subject to ongoing surveillance, which could result in upgrades or downgrades by DBRS after the date of issuance.

Notes:
All figures are in U.S. dollars unless otherwise noted.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodology is CMBS Rating Methodology, which can be found on our website under Methodologies.