DBRS Confirms All Classes of GS Mortgage Securities Trust 2014-GC26

DBRS Limited (DBRS) confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2014-GC26 (the Certificates) issued by GS Mortgage Securities Trust 2014-GC26 (the Trust):

-- 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 transaction consisted of 92 loans secured by 133 commercial properties with an original trust balance of $1.25 billion. As of the October 2018 remittance, 91 loans secured by 132 commercial properties remained in the pool with an aggregate principal balance of $1.21 billion, representing a collateral reduction of 3.3% since issuance as a result of scheduled amortization and loan repayment. Two loans, representing 0.9% of the pool, are fully defeased. Loans representing 94.4% of the pool reported year-end (YE) 2017 financials, with a weighted-average (WA) debt-service coverage ratio (DSCR) and debt yield of 1.59 times (x) and 9.4%, respectively. Fourteen of the largest 15 loans reported YE2017 financials, which yielded a WA DSCR and debt yield of 1.51x and 8.3%, respectively. 5599 San Felipe (Prospectus ID#3, 7.0% of pool) reported a low YE2017 DSCR of 0.28x due to the largest tenant at the property, representing 72% of the net rentable area (NRA), receiving temporary rent abatements through July 2017. Excluding this loan, the top 15 loans reported a WA YE2017 DSCR and debt yield of 1.71x and 9.4%, respectively, representing a WA net cash flow growth of 14.5% over the DBRS issuance figures of 1.46x and 8.0%, respectively.

As of the October 2018 remittance report, there are 12 loans, representing 8.6% of the pool, on the servicer’s watchlist, and three loans, representing 3.7% of the pool, in special servicing. Only one watchlisted loan (Holiday Inn Express & Suites Houston North; Prospectus ID#51, 0.6% of the pool) is being monitored for performance related issues, while the remaining loans on the watchlist reported a WA DSCR and debt yield of 1.85x and 10.3%, respectively. The remaining loans were placed on the watchlist for deferred maintenance, upcoming lease expirations and lack of financial reporting.

The largest specially serviced loan, 129-131 Greene Street (Prospectus ID#13, 1.9% of pool), transferred to special servicing in January 2018 due to the borrower’s lack of compliance with cash sweep provisions, even though the loan continues to perform as the New York City mixed-use property is 100% leased to a strong credit tenant (Google LLC) through August 2024. The property is currently dark, which triggered the cash sweep; however, the borrower did not comply with the sweep and the loan was transferred to special servicing. The remaining two specially serviced loans, Staybridge Suites Lafayette (Prospectus ID#27, 1.1% of pool) and 10500 Richmond (Prospectus ID#42, 0.7% of pool), transferred to special servicing due to imminent default. Staybridge Suites Lafayette, an extended-stay hotel located in Lafayette, Louisiana, experienced cash flow declines over the last two years due to the depressed oil and gas industry and the loan is currently 30-59 days delinquent. The hotel’s franchise agreement was originally scheduled to expire in February 2019; however, the servicer confirmed that the borrower entered into a Replacement Franchise Agreement in January 2015 that expires in February 2029. The special servicer is scheduled to foreclose on the property by YE2017; therefore, DBRS liquidated the loan from the pool in its analysis based on a May 2018 appraised value, which resulted a loss severity in excess of 50.0%.

10500 Richmond is secured by a Class B office building located in Houston, Texas, and was transferred to special servicing because the property’s largest tenant, WorleyParsons Group (98.5% of NRA) did not renew its lease upon its June 2018 lease expiration. The property is now 100% vacant and there are no prospective replacement tenants. As of the October 2018 remittance, the loan is 90-120 days delinquent and a foreclosure sale is anticipated by the end of the year. Given the market difficulties, DBRS liquidated the loan from the pool based on the July 2018 appraised value, which resulted a loss severity in excess of 65.0%.

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 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:

-- Queen Ka’ahumanu Center (Prospectus ID#1, 7.3% of the pool)
-- 129-131 Greene Street (Prospectus ID#13, 1.9% of the pool)
-- Staybridge Suites Lafayette (Prospectus ID#27, 1.1% of the pool)
-- 10500 Richmond (Prospectus ID#42, 0.7% of the pool)
-- Holiday Inn Express & Suites Houston North (Prospectus ID#51, 0.6% of the pool)

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.

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

The principal methodology is North American CMBS Surveillance, which can be found on dbrs.com under Methodologies & Criteria. 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.

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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

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