DBRS Morningstar Confirms Ratings on Citigroup Commercial Mortgage Trust 2015-GC33

DBRS Inc. (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-GC33 issued by Citigroup Commercial Mortgage Trust 2015-GC33 as follows:

-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- 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 (low) (sf)
-- Class C at A (low) (sf)
-- Class PEZ at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class X-D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (sf)
-- Class G at B (low) (sf)

Classes E, F, and G were removed from Under Review with Negative Implications where they were placed on August 6, 2020. The trends on these classes are Negative. In addition, DBRS Morningstar changed the trend on classes D and X-D to Negative from Stable. The trends on all other classes are Stable. The Negative trends reflect the continuing performance challenges for the underlying collateral, many of which have been driven by the impact of the Coronavirus Disease (COVID-19) pandemic. DBRS Morningstar notes that the pool has a significant concentration of hospitality properties and retail properties, representing 22.8% and 21.6% of the pool balance, respectively. These property types have been the most severely affected by the initial effects of the coronavirus pandemic and, as such, those concentrations suggest increased risks for the pool, particularly at the lower rating categories, since issuance.

As of the November 2020 remittance, 63 of the original 64 loans remain in the pool, representing a collateral reduction of 4.68% since issuance. Four loans, representing 13.1% of the pool, are in special servicing, including the second-largest loan in the pool, Hammons Hotel Portfolio (Prospectus ID#2, 10.1% of the pool balance). The $100 million trust loan represents a pari passu interest in a $250.8 million whole loan secured by a portfolio of seven hotel properties, including five full service, one limited service, and one extended stay. The portfolio consists of four Embassy Suites in North Carolina, Tennessee, Oklahoma, and Alabama; a Courtyard by Marriott in Texas; a Renaissance by Marriott in Arizona; and a Residence Inn by Marriott in Missouri. The properties have a combined total of 1,869 rooms and all were developed between 2006 and 2010. Four of the hotels include a leasehold interest in the adjacent convention centers, which are included in the collateral. The loan was transferred to special servicing in July 2020 after the borrower requested coronavirus-related relief. According to the most recent servicer commentary, coronavirus relief discussions are ongoing. Prior to the pandemic, the loan maintained a stable performance as the net cash flow (NCF) for the trailing 12 months ended March 31, 2020, was up 6% from issuance. In addition, according to the December 2019 Smith Travel Research, the hotels all maintained strong performances among their respective competitive sets, with each property reporting penetration rates exceeding 100%. Furthermore, the Embassy Suites Concord, Embassy Suites Murfreesboro, and Residence Inn Kansas City ranked first in average daily rate and in revenue per available room in each of the previous three years. Despite these strengths, DBRS Morningstar analyzed the loan with an elevated probability of default, given the borrower has requested coronavirus relief.

The second-largest loan in special servicing, the Houston Hotel Portfolio (Prospectus ID#15, 1.4% of the pool balance), is secured by a portfolio of two hotels totaling 159 rooms in the Houston metropolitan statistical area. The larger of the two hotels, Hampton Inn & Suites, is located in Port Arthur, Texas, which is 90 miles east of Houston. The second hotel, the Holiday Inn Express & Suites Houston West Road, is located about 18 miles northwest of the Houston central business district. The loan was transferred to special servicing in August 2020 for coronavirus-related relief. The loan has been delinquent since May 2020. The hotel’s performance was trending downward prior to the pandemic as the YE2019 NCF was down 49% since issuance. As of YE2019, the debt service coverage ratio was 0.95 times. In its analysis, DBRS Morningstar assumed a haircut to the issuance value and liquidated the loan from the trust, resulting in a hypothetical loss severity in excess of 30.3%.

Although it is not on the servicer’s watchlist, DBRS Morningstar is monitoring the pool’s largest loan, Illinois Center (Prospectus ID#1, 10.9% of the pool balance) because of rollover concerns. The loan is secured by two adjoining Class A office towers totaling 2.1 million square feet (sf) in the East Loop submarket of downtown Chicago. While the YE2019 NCF was up 11% since issuance, occupancy decreased to 68% as of June 2020 from 74% as of YE2019. Furthermore, the property’s largest tenant, the General Services Administration (GSA), accounting for 8% of the property’s net rentable area, has a lease expiration of November 2020. According to its website, the GSA plans to relocate its offices and has proposed a three-year lease extension to provide sufficient time to accomplish its relocation plans. The GSA leases 184,042 sf of space for the U.S. Department of Health and Human Services, U.S. Department of Commerce-International Trade Administration, and Federal Housing Finance Agency .

ESG CONSIDERATIONS
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-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:

-- Illinois Center (Prospectus ID#1, 10.9% of the pool)
-- Hammons Hotel Portfolio (Prospectus ID#2, 10.2% of the pool)

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 (March 6, 2020), 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

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905

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 [email protected].

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