DBRS Morningstar Confirms Ratings of GS Mortgage Securities Trust 2015-GC28

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-GC28 issued by GS Mortgage Securities Trust 2015-GC28 as follows:

-- 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 (low) (sf)
-- Class PEZ at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class X-C at BB (sf)
-- Class E at BB (low) (sf)
-- Class X-D at B (sf)
-- Class F at B (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance, when the transaction consisted of 74 fixed-rate loans secured by 112 commercial properties with an original trust balance of $914.0 million. As of the February 2020 remittance, there were 66 loans secured by 104 properties remaining in the pool with an outstanding trust balance of $751.5 million, representing a 17.7% collateral reduction since issuance. In the last 12 months, there have been seven loans repaid in full, which included Campus Marketplace (Prospectus ID#3) and Lincoln City Outlet Center (Prospectus ID#5). There were two loans, representing 1.9% of the pool balance, that fully defeased in the last year, and a total of 10 loans, representing 8.2% of the pool balance, that were fully defeased as of February 2020. Two loans, 4811 Airport Plaza (Prospectus ID#38; 1.0% of the pool balance) and Bradburn Village Retail Center (Prospectus ID#47; 0.8% of the pool balance), each had maturity dates scheduled February 2020 but did not pay off. Based on the updates provided by the servicer, DBRS Morningstar anticipates repayment within the near term, but to account for any uncertainty, the analysis for this review included a probability of default penalty to increase the expected loss for both loans.

The pool is relatively diverse based on loan size with the largest 10 loans representing 44.8% of the pool balance, although the largest loan (Airport Technology Park (Prospectus ID#1)) is a noteworthy 14.3% of the pool. Approximately 91.8% of the pool reported preceding cash flow figures with a weighted-average (WA) debt service coverage ratio (DSCR) of 1.85 times (x) compared with the issuer’s underwritten WA DSCR of 1.89x. The WA loan-to-value (LTV) decreased to 65.1% as of February 2020 from the WA LTV of 67.1% at issuance. Overall, WA cash flow growth has been weak, which was primarily driven by four of the top 15 loans in the pool showing cash flow declines from issuance. In the case of those loans, DBRS Morningstar increased the probability of default as part of the review.

DBRS Morningstar notes the pool’s exposure to larger hotel loans, including the Paramount Hotel loan (Prospectus ID #6; 3.2% of the pool) and the Iron Horse Hotel loan (Prospectus ID #11; 2.4% of the pool), secured by full-service hotels in Seattle, Washington, and Milwaukee, Wisconsin, respectively. As the Coronavirus disease (COVID-19) outbreak of 2020 has resulted in sharp drop-offs in leisure and business travel across the United States and globally, hotels have suffered the immediate effects of the attempts to contain the virus’ spread. The Paramount Hotel property has historically performed well above issuance expectations, reporting a YE2019 DSCR of 4.55x, suggesting there is significant cushion for cash flow declines, barring an extended period of disruption, which some analysts have projected. The other hotel, Iron Horse Hotel, is not performing as expected and was reported delinquent with the February 2020 remittance, with a YE2018 DSCR of 0.85x reported. DBRS Morningstar assumed a significant penalty to the probability of default in the analysis for the Iron Horse Hotel loan as part of this review and will continue to monitor for developments for that loan and other hotel loans in the pool as the coronavirus pandemic effects unfold.

As of the February 2020 remittance, there were two loans, representing 1.5% of the pool balance, in special servicing and 16 loans, representing 25.9% of the pool balance, on the servicer’s watchlist.

The largest specially serviced loan, 7 Becker (Prospectus ID#41; 1.0% of the pool balance), is secured by a Class A midrise suburban office property in Roseland, New Jersey. The loan was transferred to the special servicer in March 2018 for imminent default after the primary tenant (formerly 58.2% of the net rentable area) vacated the property at the lease expiration in August 2018. Per a Q4 2019 Reis report, the submarket’s vacancy rate was high at 24.1%, indicating weak demand. The property was appraised in September 2019 for an as-is value of $5.5 million, which is considerably down from the issuance-appraised value of $12.5 million. The special servicer is expecting to obtain title of the property in Q1 2020. The loan was liquidated from the pool as part of the subject review with an implied loss severity in excess of 50.0%.

The second specially serviced loan, Indian Trace Commons (Prospectus ID#63; 0.5% of the pool balance), is secured by an office building in Sunrise, Florida, approximately 20.0 miles west of Fort Lauderdale. The property was significantly damaged as a result of Hurricane Irma, which caused the largest tenant to withhold rent payments, triggering a loan default. A site inspection performed for the special servicer in January 2019 noted no outstanding deferred maintenance, indicating all repairs were completed. The property was appraised in May 2019 for $6.4 million and is actively listed for sale for $7.5 million, well above the issuance appraised value of $5.6 million. To account for the increased risks in the default on the loan, the probability of default was increased to inflate the expected loss for the loan in the modeling for this review.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at https://www.dbrsmorningstar.com/research/357792.

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 are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#1–Airport Technology Park (14.3% of the pool)
-- Prospectus ID#2–Discovery Corporate Center (6.6% of the pool) – DBRS Hotlist
-- Prospectus ID#7–MacDade Retail (2.7% of the pool) – DBRS Hotlist
-- Prospectus ID#11–Iron Horse Hotel (2.3% of the pool) – DBRS Hotlist
-- Prospectus ID#13–Kingwood Lakes Apartments (2.0% of the pool) – DBRS Hotlist

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer data for most outstanding commercial mortgage-backed security transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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 dbrsmorningstar.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 Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. 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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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