DBRS Confirms All Ratings of GS Mortgage Securities Trust 2013-GC10

DBRS, Inc. (DBRS) has today confirmed all Commercial Mortgage Pass-Through Certificates, Series 2013-GC10 issued by GS Mortgage Securities Trust 2013-GC10 as follows:

--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)

All trends are Stable.

The rating confirmations reflect the overall stability of the pool, which has experienced collateral reduction of 2.1% since issuance as a result of scheduled loan amortization. At issuance, the pool consisted of 61 fixed-rate loans secured by 93 commercial properties. As of the November 2014 remittance, all of the original 61 loans remain in the pool with an aggregate outstanding principal balance of $841,424,804. The top 15 loans continue to exhibit stable performance with a weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield of 1.61 times (x) and 9.3%, respectively, based on the current balance and the most recent year-end reporting available for the individual loans. There are four loans on the servicer’s watchlist, representing 3.0% of the current pool balance. However, only one of these loans is above 1.0% of the current pool balance. Another loan that is not on the watchlist but has reported a significant cash flow decline over the DBRS UW level is highlighted below.

Sheraton Raleigh (Prospectus ID#10, representing 2.6% of the current pool balance) is secured by a 17-story, 353-key, full-service hotel located in downtown Raleigh, North Carolina. The property is well located in Raleigh’s CBD submarket, within two miles of major interstates as well as the main campus for North Carolina State University. The YE2013 DSCR was reported at 0.60x, a decline from the DBRS UW DSCR of 1.73x, as a result of extensive renovations that were completed on the common area meeting space and the restaurant in April 2013. In addition, room renovations were scheduled in 2013 with upgrades made to soft goods, wallpaper and carpeting. This is reflective of a 65.1% decline from DBRS UW NCF at issuance as a result of slower traffic and a higher expense base. However, the July 2014 servicer commentary indicates that the occupancy and effective gross income have improved significantly from increased revenue per available room (RevPAR) as a result of the renovations. The October 2014 Smith Travel Research report shows the subject is outperforming its competitive set on the average daily rate (ADR) metric, at $136.56 compared to the competitors ADR of $129.84. However, the subject falls behind on the occupancy and RevPAR metrics, as the subject was 63.7% occupied with a RevPAR of $86.94, compared to the competitive set’s occupancy of 70.4% and RevPAR of $91.44. The occupancy remains relatively flat from issuance and the performance is expected to stabilize for the remainder of the year as a result of the completed renovations. For the purpose of this review, DBRS modeled this loan with an increased probability of default and this loan will be monitored for further cash flow decline.

Hewlett Shopping Center (Prospectus ID#26, representing 1.2% of the current pool balance) is secured by a small, unanchored retail property in Hewlett, New York, just north of Long Beach. The loan is on the servicer’s watchlist as a result of Loehmann’s, representing 51.7% of the NRA, vacating the property following their bankruptcy filing in December 2013. The tenant was originally on a lease scheduled to expire in June 2015. As a result of the tenant’s departure at the property, the Q3 2014 DSCR dropped to 0.79x from the modeled DSCR at issuance of 1.38x. The borrower serviced the sprinkler/fire alarm system, which also contributed to the decline in DSCR due to the increase in operating expenses. According to the October 2014 rent roll, the property is 50.2% occupied with major tenants including Citibank (16.6% of NRA, November 30, 2023, lease expiry), JPMorgan Chase & Co. (16.6% of NRA, August 31, 2017, lease expiry) and Pantano’s (10.6% of NRA, 6/30/2023 lease expiry). According to the servicer, the vacant space is currently listed for lease. This loans remains current and DBRS will continue to monitor and provide updates as information becomes available.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction, including details on the remaining loans in the pool. The December 2014 Monthly Surveillance Report for this transaction will be published shortly. If you are interested in receiving this report, contact us at info@dbrs.com.

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

The applicable methodologies are CMBS Rating Methodology (January 2012) and CMBS North American Surveillance Methodology (November 2012), which can be found on our website under Methodologies.

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