DBRS Confirms All Classes of GS Mortgage Securities Trust 2014-GC22

DBRS Limited (DBRS) has today confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2014-GC22 issued by GS Mortgage Securities Trust 2014-GC22 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 X-C at AAA (sf)
-- Class X-D at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (high) (sf)
-- Class PEZ at A (high) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)

All trends are Stable. DBRS does not rate the first loss piece, Class G. The Class A-S, Class B and Class C certificates may be exchanged for the Class PEZ certificates (and vice versa).

The rating confirmations reflect the overall performance of the transaction. At issuance, the transaction consisted of 59 fixed-rate loans secured by 113 commercial properties. All loans remain in the pool, with a collateral reduction of 1.1% since issuance as a result of scheduled loan amortization. As of the March 2016 remittance, loans representing 39.5% of the pool reported YE2015 financials while loans representing 56.3% of the pool reported 2015 partial-year financials. Based on the most recent financials available, the transaction reported a weighted-average (WA) debt service coverage ratio (DSCR) of 1.71 times (x) and a WA debt yield of 9.8% compared with the DBRS underwritten WA DSCR and debt yield of 1.52x and 8.6%, respectively. The top 15 loans reported a WA DSCR of 1.74x and a WA debt yield of 9.4% compared with the issuance WA DSCR and debt yield of 1.57x and 8.4%, respectively.

The College Towers loan (Prospectus ID#14, 1.7% of the current pool balance) is secured by a 289-unit student housing property located in Kent, Ohio. There are a total of 513 beds; however, leases are signed on a per-unit basis. The subject serves Kent State University, which reported a 7.9% increase in enrollment for the Fall 2015 semester when compared with the Fall 2011 semester, representing an average annual growth rate of 1.9%. As of the December 2015 rent roll, the subject was 98.3% occupied, an increase since issuance at 96.9%. Average rental rates have also increased to $771 per unit compared with $758 per unit at issuance. Despite healthy occupancy and rental rates, the performance of the property has been below DBRS underwritten (UW) levels for two consecutive years. The YE2015 DSCR was 1.12x, remaining unchanged from YE2014, compared with the DBRS UW DSCR of 1.25x. The net cash flow (NCF) decline was attributable to an increase in operating expenses while effective gross income has been in line with expectations at issuance. DBRS modeled this loan in accordance with actual reported figures to reflect the performance of the loan.

As of the March 2016 remittance, there are no loans in special servicing and two loans on the servicer’s watchlist. One of the loans on the watchlist was flagged because of minor deferred maintenance items and it is expected that the loan will be removed from the watchlist as the issues are resolved. The largest loan on the servicer’s watchlist is discussed below.

The Westwood Plaza loan (Prospectus ID#22, 1.2% of the current pool balance) is secured by a 201,712 square foot Class B grocery-anchored shopping center located in Johnstown, Pennsylvania. At issuance, the subject was anchored by Good Cents Grocery (Good Cents) and Conemaugh Memorial Medical Center (Conemaugh). This loan was placed on the watchlist as Good Cents, representing 22.8% of the net rentable area (NRA), vacated the property in March 2015 prior to its original lease expiration in December 2016. According to the September 2015 rent roll, the property was 90.1% occupied; however, without Good Cents, the actual occupancy would drop to 67.3%. According to CoStar, the property is 92.3% occupied with an asking rental rate of $10.00 per square foot (psf). Good Cents space is listed as occupied; however, no updates regarding the status of this space has been provided. Retail properties in the Johnstown area had a vacancy rate of 4.4% with average asking rental rates of $8.00 psf. At issuance, the loan was structured with an upfront tenant improvement (TI)/leasing commissions (LC) reserve of $750,000 as well as ongoing TI/LC deposits of $0.75 psf annually to mitigate the risk of the anchor tenants, which both had lease expiration dates in 2016. Conemaugh occupies 29.8% of the NRA with a lease expiration in November 2016. As of March 2016, the balance of the reserve was $1.1 million. According to the most recent available reporting for the loan, the Q3 2015 annualized DSCR was 1.32x, which is in line with the DBRS underwritten DSCR of 1.30x. Because of the uncertainty regarding the anchor space, DBRS modeled this loan with a haircut to the Q3 2015 annualized NCF to reflect the risk of a vacant anchor.

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

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

The applicable methodologies are North American CMBS Rating Methodology (March 2016) and CMBS North American Surveillance (December 2015), which can be found on our website under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.