DBRS Assigns Provisional Ratings to GS Mortgage Securities Trust 2013-GCJ16

DBRS has today assigned provisional ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2013-GCJ16 (the Certificates), to be issued by GS Mortgage Securities Trust 2013-GCJ16. 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-AB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class X-C at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class PEZ at A (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)

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

The Class X-A, X-B and X-C 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 certificates’ position within the transaction payment waterfall when determining the appropriate rating.

Up to the full certificate balance of the Class A-S, Class B and Class C certificates may be exchanged for Class PEZ certificates. Class PEZ certificates may be exchanged for up to the full certificate balance of the Class A-S, Class B and Class C certificates.

The collateral consists of 78 fixed-rate loans secured by 134 commercial, multifamily and manufactured housing properties, comprising a total transaction balance of $1,134,059,119. The DBRS sample included 38 loans, representing 71.5% of the pool. One loan, representing 5.3% of the pool, is shadow-rated investment grade by DBRS. The pool has a high concentration of properties located in urban markets (22.1% of the pool), which benefit from a larger investor, consumer and tenant base, even in times of stress. The pool is also relatively diverse based on loan size, with the concentration level similar to a pool of 35 equal-sized loans and no loan representing more than 6.4% of the pool.

A high percentage of loans within the pool (34.1%) have sponsorship associated with a prior discounted payoff (DPO), a voluntary bankruptcy filing, limited liquidity, a historical negative credit event or minimal experience with the respective property type. This concentration is much greater than the comparative level of other recently rated DBRS conduit transactions, and DBRS increased the probability of default (POD) for loans with identified sponsorship concerns. Approximately 20.6% of the pool is secured entirely or in part by multifamily properties, which is unique for a non-agency conduit transaction and above the concentration level of other recently rated DBRS conduit transactions. Additionally, loans secured by hotels represent 14.5% of the pool, including two of the largest ten loans. Hotel properties have higher cash flow volatility than traditional property types, as 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 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.