DBRS Assigns Provisional Ratings to GS Mortgage Securities Trust 2014-GC22

DBRS has today assigned provisional ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2014-GC22 (the Certificates), to be issued by GS Mortgage Securities Trust 2014-GC22. 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 X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class X-C at AAA (sf)
-- Class X-D at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (sf)
-- Class PEZ at A (high) (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)

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

The Class X-A, X-B, X-C and X-D 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 59 fixed-rate loans secured by 113 commercial properties, comprising a total transaction balance of $961,465,513. The DBRS sample included 28 loans, representing 76.6% of the pool. The largest loan in the pool, Maine Mall, which represents 11.4% of the pool, is sponsored by GGP, whom DBRS considers to be a strong borrower and mall operator. The property is the dominant mall in the trade area, with YE2013 comparable in-line sales of greater than $450 psf, when excluding the Apple Store from consideration. Apple’s store sales at the mall were $6,357 psf as of YE2013. In addition, the third-largest loan in the pool, EpiCentre, which represents 8.8% of the pool, is sponsored by CIM Group, LLC, whom DBRS also considers to be a strong sponsor and has nearly $15 billion of assets under management. Only four properties, securing in whole or in part four loans representing 4.2% of the pool, are leased to a single tenant. Single-tenant properties have been found to have higher loss severities in the event of default. In addition, the pool has good geographic diversity, as no state represents more than 11.7% of the pool. Conduit transactions often have a state concentration in excess of 20%.

The transaction has a high concentration of 19 loans, representing 53.7% of the pool, with DBRS Refi DSCRs below 1.00x. This is above levels seen in other transactions recently rated by DBRS, and well above transactions from 2013 and prior years. Although this indicates substantial refinance risk, the transaction’s DBRS Refi DSCRs are based on a weighted-average stressed refinance constant of 9.82%, which implies an interest rate of 9.27%, amortizing on a 30-year schedule. This represents a significant stress of 4.7% over the weighted-average contractual interest rate of the loans in the pool. Also, the majority of loans with a DBRS Refi DSCR below 1.00x are either large institutional-quality properties/portfolios (Maine Mall, Selig Portfolio) or multifamily properties that typically have lower debt yields due to their higher cash flow stability. The pool is concentrated by loan size as the top ten loans represent 58.3% of the overall pool balance and the concentration level similar to a pool of 21 equal-sized loans. Because of the elevated concentration risk, a POD penalty was applied to the entire pool. In addition, 11 loans representing 27.3% of the pool are secured by multiple property portfolios, which enhances diversity at the loan level.

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 Rule 17g-7 Report of Representations and Warranties is hereby incorporated by reference and can be found by clicking on the link to the right under Other Research or by contacting us at info@dbrs.com.

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