DBRS Morningstar Confirms All Classes of GS Mortgage Securities Trust, Series 2012-GCJ7

DBRS Inc. (DBRS Morningstar) confirmed all classes of the Commercial Mortgage Pass-Through Certificates, Series 2012-GCJ7 issued by GS Mortgage Securities Trust, Series 2012-GCJ7 as follows:

-- Class A-4 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (sf)
-- Class D at BBB (low) (sf)
-- Class E at B (high) (sf)
-- Class X-B at B (low) (sf)
-- Class F at CCC (sf)

All trends are Stable, with the exception of Classes E and X-B, which carry a Negative trend, and Class F, which has a rating for which trends are not assigned.

The trends on Classes E and X-B remain Negative to reflect the ongoing concern regarding the Shoppes on Main loan (Prospectus ID#12, 3.3% of the pool), which is secured by a completely vacant retail property located in White Plains, New York, and was transferred to special servicing as of the February 2020 remittance. Prior to that loan’s transfer, there were two loans in special servicing in 545 Long Wharf Drive (Prospectus ID#14) and Fifth Third Center (Prospectus ID#24). Both of those loans were liquidated with the February 2020 remittance, with a combined loss amount of $28.3 million, slightly below DBRS Morningstar’s projections at last review. However, DBRS Morningstar notes that any cushion left in the lower than expected losses for those two loans will likely be offset by the liquidation of the Shoppes on Main loan, supporting the CCC rating maintained for Class F and the B (low) rating for the related interest-only X-B class, as well as the Negative trend on Class E. For further information on the Shoppes on Main loan, please see the loan commentary in the DBRS Viewpoint platform, for which information has been provided below.

The rating confirmations reflect the significant paydown since issuance, as well as the overall healthy performance of the bulk of the loans in the top 15 and the relatively significant defeasance concentration, which represents 15.7% of the pool balance. As of the February 2020 remittance, there were 58 of the original 79 loans remaining in the pool, with a collateral reduction of 38.5% since issuance.

Loans representing 84.3% of the pool reported year-end (YE) 2018 financials with a weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.70 times (x) and 13.8%, respectively. The largest 15 non-defeased loans all reported YE2018 financials, with a WA DSCR and WA debt yield of 1.74x and 14.0%, respectively, representing a WA cash flow improvement of 26.1% over the DBRS Mornignstar net cash flow figures derived at issuance.

As of the February 2020 remittance, there are eight loans, representing 9.1% of the pool that are on the servicer’s watchlist and one loan, representing 3.3% of the pool in special servicing.

The largest loan on the watchlist, 110 Plaza San Diego (Prospectus ID#9, 4.8% of the pool), is secured by a Class B office building in downtown San Diego, California. The loan was added to the servicer’s watchlist in 2015 for low occupancy and low DSCR after the property’s largest tenant, California Department of Justice (37.1% of the net rentable area), provided notice to vacate at the October 2015 lease expiry date. The property’s occupancy rate fell as low as 35% in 2015 but has increased back up to 72.2% as of September 2019. This loan has been added to the DBRS Morningstar Hotlist.

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 and X-B 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#9 – 110 Plaza San Diego (4.8% of the pool) (DBRS Morningstar Hotlist)
-- Prospectus ID#12 – Shoppes on Main (3.3% of the pool) (DBRS Morningstar Hotlist)
-- Prospectus ID#45 – Arrowhead Promenade (1.1% of the pool) (DBRS Morningstar 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 CMBS 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 www.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 Morningstar Global Structured Finance Related Methodologies document, which can be found on www.dbrs.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 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@dbrsmorningstar.com.

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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

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

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