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

DBRS Limited (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 D to AA (low) (sf) from A (high) (sf)
-- Class E to BBB (sf) from BBB (low) (sf)
-- Class X to BB (high) (sf) from BB (sf)
-- Class F to BB (sf) from BB (low) (sf)

DBRS also confirmed the ratings of three classes as follows:

-- Class A-4 at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AAA (sf)

All trends are Stable.

These rating upgrades reflect the continued strong performance of the transaction, which has experienced collateral reduction of 44.9% since issuance, with 38 of the original 57 loans remaining in the pool as of the June 2017 remittance report. The majority of the remaining loans in the pool were structured with ten-year terms and will mature in 2020 and 2021. There are currently three loans, representing 6.3% of the pool, including two in the top 15, that are scheduled to mature in the next 12 months. One of these loans, representing 3.3% of the pool, is fully defeased, while the other two reported a weighted-average (WA) YE2016 debt service coverage ratio (DSCR) of 1.75 times (x). A total of eight loans, representing 11.2% of the pool, including three in the top 15, are fully defeased.

Based on the servicer’s YE2016 reported figures, the transaction benefits from a healthy in-place WA DSCR of 2.00x and debt yield of 15.1%, as compared with the issuance levels of 1.80x and 12.0%, respectively. The performance for the largest 12 non-defeased loans has also been strong since issuance, with WA net cash flow growth of 26.6% over the DBRS issuance figures and a WA DSCR of 2.10x, according to YE2016 reporting.

As of the June 2017 remittance report, there are eight loans, representing 34.5% of the pool, including four in the top 15, on the servicer’s watchlist, and there are no loans in special servicing. Six of the eight loans on the watchlist, representing 30.6% of the pool, are being monitored for minor deferred maintenance issues, which are not significant credit concerns.

At issuance, the Oxford Valley Mall loan, representing 8.2% of the current pool balance, was shadow-rated investment grade. DBRS has today confirmed that the performance of this loan remains consistent with investment-grade loan characteristics.

The rating assigned to the Class F note materially deviates from the higher ratings implied by the quantitative results. DBRS considers a material deviation to be a rating differential of three or more notches between the assigned rating and the rating implied by the quantitative results that is a substantial component of a rating methodology. The deviations are warranted given the undemonstrated sustainability of loan performance trends.

DBRS has provided updated loan-level commentary and analysis for larger and/or pivotal watchlisted loans as well as for the largest 15 loans in the pool in the DBRS CMBS IReports platform. Registration is free. To view these and future loan-level updates provided as part of DBRS’s ongoing surveillance for this transaction, please register or log into DBRS CMBS IReports at www.ireports.dbrs.com.

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 principal methodologies are North American CMBS Multi-borrower Rating Methodology (March 2017) and CMBS North American Surveillance (March 2017), which can be found on dbrs.com under Methodologies.

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