DBRS Upgrades Four Classes of GS Mortgage Securities Trust, Series 2011-GC3

DBRS, Inc. (DBRS) has today upgraded four classes of Commercial Mortgage Pass-Through Certificates Series 2011-GC3 issued by GS Mortgage Securities Trust, Series 2011-GC3 as follows:

-- Class B to AAA (sf) from AA (high) (sf)
-- Class C to AA (low) (sf) from A (high) (sf)
-- Class D to BBB (high) (sf) from BBB (sf)
-- Class E to BB (high) (sf) from BB (sf)

In addition, DBRS has confirmed the ratings of eight remaining classes of Commercial Mortgage Pass-Through Certificates Series 2011-GC3 as follows:

-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class F at B (sf)
-- Class X at AAA (sf)

All trends are Stable. DBRS does not rate the first lost piece, Class G.

The rating upgrades reflect the increased credit enhancement to the bonds as a result of successful loan repayment and scheduled loan amortization. As of the February 2015 remittance, the collateral consists of 54 loans secured by 111 commercial properties. The current pool balance of $1.40 billion represents a collateral reduction of 15.9% since issuance. The transaction also benefits from defeasance collateral, as four loans representing 2.4% of the current pool balance, are fully defeased. Overall, the pool has reported strong performance, as the largest 15 loans in the transaction report a weighted-average debt service coverage ratio (DSCR) and debt yield of 2.09 times (x) and 14.3%, respectively, according to the most recently reported year-end financials.

As of the February 2015 remittance report, there is one loan in special servicing and five loans on the servicer’s watchlist, representing 0.3% and 5.9% of the current pool balance, respectively. Four out of the five loans on the servicer’s watchlist are flagged due to non-performance related to minor deferred maintenance issues, including cracked sidewalks and tripping hazards. These four loans have an average DSCR of 1.65x and exhibit stable performance. The one loan in special servicing is highlighted below.

The Prince and Bleecker Portfolio (Prospectus ID#50, 0.3% of the current pool balance) is secured by two mixed-use properties in Manhattan, New York. Both properties consist of single-story retail below multifamily units. The loan transferred to special servicing in March 2014, due to default and remains outstanding as of January 2014. Glass Ratner Management & Realty Advisors has been installed as the receiver to collect rents and manage the property. The borrower filed for bankruptcy in October 2014. At issuance, the appraised value of the collateral was $9.2 million; however, a January 2015 appraisal valued the portfolio at $16.0 million, significantly in excess of the current total loan exposure of approximately $4.5 million. According to the special servicer, the borrower will attempt to sell the properties.

At issuance, DBRS shadow-rated two loans, representing 5.8% of the current pool balance, as investment grade. One of those loans, the Stanley Hotel (Prospectus ID#33, 0.8% of the current pool balance) has fully defeased. DBRS today confirmed that the performance of the loans remains consistent with investment-grade loan characteristics.

Within the next 12 months, nine loans, representing 26.8% of the current pool balance, are scheduled to mature. These loans are reporting a weighted-average exit debt yield of 13.5% based on the most recent year-end reporting.

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 largest loans in the pool and loans on the servicer’s watchlist. The February 2015 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.

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

The applicable methodologies are CMBS Rating Methodology (January 2012) and CMBS North American Surveillance (January 2015), which can be found on our website under Methodologies.