DBRS Confirms All Classes of GS Mortgage Securities Corporation Trust 2017-FARM

DBRS Limited (DBRS) confirmed all ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2017-FARM (the Certificates) issued by GS Mortgage Securities Corporation Trust 2017-FARM:

-- Class A at AAA (sf)
-- Class B at AA (sf)
-- Class HRR at AA (sf)

All trends are Stable.

The rating confirmations reflect the stable performance of the transaction since issuance. The trust loan is secured by an interest-only (IO) ten-year anticipated repayment date (ARD) loan collateralized by the leasehold interests in a 2.0 million square foot (sf) office park located in the Mill Avenue District of Tempe, Arizona. In December 2017, the property was sold to a joint venture between JDM Partners, LLC and Transwestern Investment Group for $930 million in a sale lease-back transaction with State Farm Mutual Automobile Insurance Company (State Farm). The property is subject to a 99-year ground lease with Arizona State University that expires in August 2112.

Per the September 2018 rent roll, the property is 99.5% occupied at an average rental rate of $25.63 per sf, with 96.8% of the net rentable area (NRA) leased to State Farm, an investment-grade tenant. State Farm executed five separate leases with staggered expiries beginning in November 2032 (28.8% of NRA) and going through November 2042. All leases extend beyond the ARD in 2027, with one lease expiring at final maturity in 2032, and there are no termination options. State Farm strategically chose this location in an effort to consolidate small regional offices, and the location houses all facets of the company’s operations, including a call centre, automobile insurance, home insurance, banking, executive space and back office space.

The loan reported an annualized Q2 2018 debt service coverage ratio (DSCR) of 2.56 times (x), down from the DBRS Term DSCR of 2.78x, due to the contractual yearly rent steps incorporated into the DBRS net cash flow at issuance.

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 this transaction.

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

The principal methodology is the North American CMBS Surveillance Methodology, 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.