DBRS Confirms the Ratings on GS Mortgage Securities Trust 2014-GC26

DBRS Limited (DBRS) confirmed the Commercial Mortgage Pass-Through Certificates, Series 2014-GC26, issued by GS Mortgage Securities Trust 2014-GC26 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 AA (high) (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class PEZ at A (sf)
-- Class D at BBB (low) (sf)
-- Class X-C at BB (sf)
-- Class E at BB (low) (sf)
-- Class F at B (sf)
-- Class X-D at B (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction. At issuance, the collateral consisted of 92 fixed-rate loans secured by 133 commercial properties. As of the November 2017 remittance, all 69 loans remained in the pool with an aggregate principal balance of $1.23 billion, representing a collateral reduction of 1.9% since issuance due to scheduled loan amortization. There are currently 11 loans (23.8% of the pool) with remaining interest-only (IO) periods, ranging from 12 to 24 months, while 11 loans (17.4% of the pool) are structured with full IO terms. One loan (0.6% of the pool) is secured by collateral that has been fully defeased. To date, 87 loans (96.1% of the pool) have reported partial-year 2017 financials, while 88 loans (97.5% of the pool) have reported YE2016 financials. Based on the most recent year-end financial reporting, the transaction has a weighted-average (WA) debt service coverage ratio (DSCR) and WA Debt Yield of 1.58 times (x) and 9.2%, respectively, compared with the DBRS WA Term DSCR and WA Debt Yield of 1.44x and 8.5%, respectively.

The pool is concentrated by property type, as 38 loans, representing 41.1% of the pool, are secured by retail properties (including one regional mall; 7.2% of the pool), while 15 loans (29.9% of the pool) are secured by office properties. By loan size, the pool is relatively diverse, as the Top 15 loans only represent 49.7% of the pool. Based on the most recent cash flows available, the Top 15 loans reported a WA DSCR of 1.31x, compared with the WA DBRS Term DSCR of 1.48x, reflective of an 8.5% net cash flow (NCF) decline from the DBRS issuance figures. Excluding the 5599 San Felipe loan (Prospectus ID#3, 6.5% of the pool) from this analysis, as the largest tenant at the property (representing 72.0% of the net rentable area) received 12 months of rental abatement, the Top 15 loans had a WA DSCR of 1.57x, compared with the DBRS Term DSCR of 1.46x, representing a WA NCF growth of 12.7% over the DBRS issuance figures.

As of the November 2017 remittance, there is one loan (1.9% of the pool) in special servicing and 13 loans (13.6% of the pool) on the servicer’s watchlist. The 129-131 Green Street loan (Prospectus ID#13) was transferred to special servicing in December 2016 for imminent default as a result of an uncooperative borrower, who failed to implement cash management and a cash trap. The servicer states that a demand for compliance with the loan documents was made to the borrower, and since then, counsel has been engaged. Two of the loans (1.7% of the pool) on the servicer’s watchlist are secured by limited-service hotel properties located in heavily oil-reliant economies; both have been flagged for performance-related reasons. Two other loans (6.8% of the pool) were also flagged for performance declines; however, both properties have larger tenants who had extended rental abatement periods, artificially depressing both loans’ cash flows. The remaining loans on the watchlist were flagged as a result of either increased vacancy/near-term tenant rollover (five loans; 2.6% of the pool) or because of deferred maintenance (three loans; 2.3% of the pool).

Classes X-A, X-B, X-C and X-D are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated reference tranche adjusted upward by one notch if senior in the waterfall.

All ratings will be subject to ongoing surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

DBRS has provided updated loan-level commentary and analysis for larger and/or pivotal watchlisted and specially serviced loans in the transaction, as well as for the Top 15 loans where updated performance information from issuance was available, in the DBRS Viewpoint 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 Viewpoint at viewpoint.dbrs.com.

Notes:
All figures are in American 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.

The principal methodology is CMBS North American Surveillance, which can be found on dbrs.com under Methodologies. For a list of the Structured Finance related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document on www.dbrs.com. Please note that not every related methodology listed under a principal Structured Finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

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

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

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