DBRS Upgrades Five Classes of GS Mortgage Securities Trust, 2010-C1

DBRS Limited (DBRS) upgraded five classes of Commercial Mortgage Pass-Through Certificates Series 2010-C1 (the Certificates) issued by GS Mortgage Securities Trust, 2010-C1 as follows:

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

All trends are Stable.

These rating actions reflect the strong overall performance of the transaction, which has benefited from a collateral reduction of 26.4% since issuance, with 16 of the original 23 loans remaining in the pool as of the June 2018 remittance report. In addition, four loans, representing 19.6% of the pool, are fully defeased. All of the remaining loans in the pool were structured with ten-year terms and will mature in 2020. All 12 current non-defeased loans are reporting YE2017 financials. These loans reported a weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.95 times (x) and 17.0%, respectively, representing a WA cash flow improvement of 16.9% over the DBRS net cash flow figures derived at issuance.

As of the June 2018 remittance, there is one loan, representing 6.9% of the pool, on the servicer’s watchlist and no loans in special servicing. Grand Central Mall (Prospectus ID #7), a regional mall in Vienna, West Virginia, is being monitored following the bankruptcy filing of Toys “R” Us, which makes up 6.1% of the collateral’s net rentable area and 5.9% of base rental income. In the analysis for this loan, DBRS assumed a stressed cash flow scenario to adjust for the reduced rental income now that the store is closed. For additional information on this loan, please see the loan commentary on the DBRS Viewpoint platform, for which information is provided below.

Six of the 12 remaining non-defeased loans, representing 54.8% of the outstanding pool balance, were shadow-rated investment grade by DBRS at issuance. Three of the six loans – Burnsville Center (Prospectus ID #2, 11.8% of the pool), Valley View (Prospectus ID #4, 9.4% of the pool) and Parkway Place (Prospectus ID #8, 6.0% of the pool) – were shadow-rated investment grade due to strong sponsorship in CBL Properties (an affiliate of CBL & Associates (CBL)), as well as the generally strong credit characteristics for all three loans. While the credit characteristics and performance remain strong for all of these loans, DBRS has concerns about the overall strength of the sponsor, given news reports that CBL has come under stress with the current retail environment and its exposure to Class B malls located in less dense locations. In late 2017, two credit rating agencies downgraded CBL’s credit rating to “junk” status. As such, the shadow ratings for those three loans were removed with this review, resulting in relatively minor impact to the overall analysis given the high coverage ratios for all loans and the paydown since issuance due to the 25-year amortization schedule in place for each. For updated information on the underlying properties, including updated sales information for anchors in place and the DBRS view on the location and performance, please see the DBRS Viewpoint platform, for which information has been provided below.

The Aardex Ground Lease Portfolio loan (Prospectus ID #11, 2.8% of the pool), secured by a portfolio of four parcels of land, was shadow-rated due to the stability of the underlying ground rent payments. In early 2017, one of the land parcels (located in Fresno) was seized by the State of California, resulting in a paydown of approximately $4.5 million (collateral reduction of 21.1%). The servicer’s YE2017 analysis, which shows a DSCR of 1.19x, is artificially low; however, as the servicer’s debt service figure does not appear to account for the reduced principal amount, DBRS has asked for clarification from the servicer and, as of the date of this press release, a response is pending. As the remaining collateral parcels continue with cash flow as expected, with the paydown amount near the release price of $4.91 million structured at issuance, DBRS has confirmed the shadow rating on the loan with this review.

With this review, DBRS has also confirmed that the performance of the remaining two shadow-rated loans, 660 Madison Avenue Retail (Prospectus ID #1, 14.3% of the pool) and Cole Portfolio (Prospectus ID #5, 10.5% of the pool), remains consistent with investment-grade loan characteristics. For additional information on these loans, please see the loan commentary on the DBRS Viewpoint platform, for which information is provided below.

Class X is an interest-only (IO) certificate that references a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation 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.

As part of this review, DBRS has provided updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID #1 – 660 Madison Avenue Retail
-- Prospectus ID #2 – Burnsville Center
-- Prospectus ID #4 – Valley View
-- Prospectus ID #5 – Cole Portfolio
-- Prospectus ID #7 – Grand Central Mall
-- Prospectus ID #8 – Parkway Place
-- Prospectus ID #11 – Aardex Ground Lease Portfolio

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for the entire CMBS universe, as well as deal and loan-level commentary for all DBRS-rated transactions.

The ratings assigned to Classes D, E and F materially deviate 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 uncertain loan-level event risk.

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

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.

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 under Related Documents or by contacting us at info@dbrs.com.

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 for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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