DBRS Upgrades One Class and Confirms All Remaining Classes of GS Mortgage Securities Trust, 2010-C1

DBRS, Inc. (DBRS) has today upgraded one class of GS Mortgage Securities Trust, 2010-C1 as follows:

-- Class D to A (sf) from A (low) (sf)

In addition, DBRS has confirmed the remaining classes in the transaction as listed below:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class B at AAA (sf)
-- Class X at AAA (sf)
-- Class C at AA (high) (sf)
-- Class E at BB (high) (sf)
-- Class F at B (high) (sf)

All trends are Stable.

These rating actions reflect the strong performance of the transaction, which has experienced collateral reduction of 21.7% since issuance, with 19 of the original 23 loans remaining in the pool as of the July 2016 remittance. Based on the servicer’s reported YE2015 figures, the transaction benefits from strong overall credit metrics with a weighted-average (WA) debt service coverage ratio (DSCR) of 2.10 times (x) and WA debt yield of 18.8%. These metrics compare well with the issuance levels of 1.80x and 14.5%, respectively. The performance for the 12 largest non-defeased loans has also been quite strong since issuance, with a WA net cash flow (NCF) growth of 24.9% over the DBRS underwritten (UW) figures at YE2015 and a WA DSCR of 2.05x, up from the 1.65x DBRS UW NCF figure. Furthermore, the WA occupancy for the 12 largest non-defeased loans is strong at 97.7%. The transaction also benefits from three defeased loans in the pool, representing 17.2% of the overall balance, with all loans in the Top 15.

As of the July 2016 remittance report, there are no loans in special servicing and two loans, representing 0.8% of the pool, on the servicer’s watchlist; however, these loans are being monitored for not reporting YE2015 financials, not for cash flow declines. Loans secured by retail and regional mall properties comprise nearly 77.0% of the non-defeased loans in the pool. This concentration risk is mitigated by the strong cash flow growth of the loans since issuance. Additionally, a significant portion of the retail properties in the pool are shadow-rated investment grade by DBRS.

At issuance, DBRS shadow-rated 11 loans investment grade. These shadow ratings were generally assigned based on the stability of cash flows, the refinance DSCR and the exit debt yield. Additional factors include the desirability of the location and the quality of the property, tenancy and sponsor. Since issuance, two of those loans, Prospectus ID #9, 180 N. LaSalle, and Prospectus ID #17, Lake View Plaza, have paid out and left the pool at their respective maturity dates.

The nine remaining shadow-rated loans, which represent approximately 56.0% of the current pool balance, are Prospectus ID #1, 660 Madison Avenue (14.2% of Pool), Prospectus ID #2, Burnsville Center (11.8% of Pool), Prospectus ID #5, Cole Retail Portfolio (10.2% of Pool), Prospectus ID #4, Valley View Mall (9.3% of Pool), Prospectus ID #8, Parkway Place (6.0% of Pool), Prospectus ID #11, Aardex Ground Lease (3.5% of Pool), Prospectus ID #19, Winn Dixie – Hammond (0.4% of Pool), Prospectus ID #21, Winn Dixie – Montgomery (0.4% of Pool) and Prospectus ID #22, Winn Dixie – Opa Locka (0.4% of Pool). DBRS has today confirmed that the performance of these loans remains consistent with investment-grade loan characteristics. The WA NCF growth over the DBRS UW figures for these loans was 20.5% at YE2015.

The largest loan in the pool, Prospectus ID #1, 660 Madison Avenue Retail (14.2% of Pool), is secured by a 264,498-square foot (sf) anchored retail condominium unit in the Upper East Side of Manhattan, located one block east of Central Park. The collateral is 100.0% leased to Barneys Department Store (Barneys) through January 2019. Although the lease ends approximately one year prior to loan maturity, the tenant has four ten-year lease extension options. According to the YE2015 OSAR, the DSCR was 2.04x, an increase from the 1.65x DBRS UW figure, and the exit debt yield was 20.0%. At issuance, this loan was shadow-rated because of the above-average property quality, the importance of the store to Barneys, the short 25-year amortization schedule and the high exit debt yield.

The second-largest non-defeased loan is Prospectus ID #2, Burnsville Center (11.8% of Pool), which is secured by a 523,692 sf portion of a 1.1 million sf mall in Burnsville, Minnesota. The subject is the only Minneapolis area mall south of the Minnesota River. The mall is anchored by Macy’s, Sears, JCPenney, Gordmans and Dick’s Sporting Goods; however, only Gordmans and Dick’s Sporting Goods are a part of the collateral for the loan. As of the March 2016 rent roll, the collateral portion of the mall is 91.0% occupied, up from 88.0% at March 2015. According to the YE2015 OSAR, the DSCR is 1.95x, an increase from the 1.51x DBRS UW figure, and 1.85x at YE2014. At issuance, this loan was shadow-rated because of the loan’s 25-year amortization schedule, the experienced sponsor, its reputation as an established regional mall and the loan’s strong credit characteristics.

Although occupancy rates and cash flow growth since issuance are healthy for the regional malls and anchored retail properties in the portfolio, sales reporting obtained for this review was limited to two properties, Prospectus ID #2, Burnsville Center, and Prospectus ID #6, Mall at Johnson City, which showed generally healthy figures. Burnsville Center’s reporting anchor tenants, Macy’s and Gordmans, reported stable sales year over year (YOY) for YE2015, with $131 sales psf and $137 sales psf, respectively. Meanwhile, Mall at Johnson City as a whole experienced a slight decrease in sales YOY, with $217 sales psf, down 3.4% from the previous year as of the T-12 May 2016 sales report.

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 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 on this industry, visit www.dbrs.com or contact us at info@dbrs.com.