Press Release

DBRS Morningstar Downgrades Five Classes and Confirms Four Classes of GS Mortgage Securities Trust 2011-GC5

CMBS
December 10, 2020

DBRS Limited (DBRS Morningstar) downgraded its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2011-GC5 issued by GS Mortgage Securities Trust 2011-GC5 as follows:

-- Class B to AA (high) (sf) from AAA (sf)
-- Class C to A (sf) from AA (low) (sf)
-- Class D to BB (sf) from BBB (sf)
-- Class E to CCC (sf) from BBB (low) (sf)
-- Class F to C (sf) from B (high) (sf)

In addition, DBRS Morningstar confirmed the following ratings:

-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)

With this review, DBRS Morningstar removed Classes D, E, and F from Under Review with Negative Implications, where they were placed on August 6, 2020.

DBRS Morningstar also changed the trends on Classes B, C, and D to Negative from Stable. All other trends are Stable, with the exception of Classes E and F, which have ratings that do not carry trends. In addition, DBRS Morningstar added an Interest in Arrears designation for Class F and discontinued the rating for the notional Class X-B with this review.

The rating downgrades and Negative trends reflect the continued performance challenges for the underlying collateral, with previous cash flow declines for several large loans secured by regional malls, including the second-largest loan in the pool, which is in special servicing. Previous performance declines and the generally challenging landscape for regional malls have both been compounded by the effects of the Coronavirus Disease (COVID-19) global pandemic. In addition to the two loans representing 16.3% of the pool in special servicing as of the November 2020 remittance, there are 11 loans on the servicer’s watchlist, representing 20.2% of the pool. DBRS Morningstar notes that retail collateral makes up the largest concentration by property type overall, with 22 loans comprising 65.2% of the current trust balance. The pool also features loans backed by four hospitality properties, representing 5.2% of the pool. Both hospitality and retail properties have been the most severely affected by the initial effects of the coronavirus pandemic, exacerbating the concentration of loans backed by retail properties and suggestive of significantly increased risks for the pool since issuance.

In addition to the pool’s second-largest remaining loan, Park Place Mall (Prospectus ID#1, 15.3% of the pool), which is in special servicing, there are two additional top 15 loans backed by regional malls in Parkdale Mall & Crossing (Prospectus ID#5, 6.8% of the pool) and Champlain Centre (Prospectus ID#13, 2.7% of the pool). All three of the collateral malls—located in Tucson, Arizona; Beaumont, Texas; and Plattsburg, New York—are located in secondary markets and have shown signs of increased risks from issuance including anchor closures for some, cash flow declines for others, and sponsorship issues in either a reduced commitment from a strong sponsor or a weak sponsor that has recently filed for bankruptcy amid the pandemic. Although all three loans had issuance values that suggested going-in loan-to-value ratios (LTVs) ranging from 57.0% to 64.0%, the as-is values for all three have likely fallen significantly since issuance, combining with the other increased risks for these loans to suggest significantly increased risks to the trust since issuance, a primary driver for the ratings downgrades taken by DBRS Morningstar.

As of the November 2020 remittance, 49 of the original 74 loans remain in the pool, representing a collateral reduction of 37.0% since issuance. Eighteen loans, representing 25.6% of the current pool balance, are fully defeased. Additionally, there are 11 loans, representing 20.2% of the current trust balance, on the servicer’s watchlist per the November 2020 remittance. These loans are being monitored for a variety of reasons including low debt service coverage ratios (DSCR), upcoming tenant rollover risk, occupancy issues, and deferred maintenance; however, the primary reason for the increase of loans on the watchlist is for hospitality and retail properties with a low DSCR stemming from disruptions related to the coronavirus pandemic.

The two loans in special servicing are Park Place Mall and Holiday Inn Express Anchorage (Prospectus ID#33, 1.0% of the pool), both of which are highlighted below.

The Park Place Mall loan transferred to special servicing in September 2020 because of imminent monetary default. The loan is secured by a 1.1 million-square foot (sf) regional mall, of which 478,333 sf is part of the collateral. The property is located in Tucson. At issuance, the mall was anchored by Sears (which vacated in July 2018 and later backfilled with Round 1 Bowling & Amusement), Macy’s (which permanently closed in Q2 2020), and Dillard’s, all of which own their improvements and are not part of the collateral. Major collateral tenants include Century Theatres (15.3% of the net rentable area (NRA) through August 2021), Total Wine & More (5.6% of the NRA through August 2027), and H&M (3.9% of the NRA through April 2022). The sponsor of the loan at issuance was General Growth Properties, which Brookfield Properties acquired in 2018.

According to the servicer’s commentary, the sponsor is no longer supporting the asset with additional equity infusions. The loan was more than 30 days delinquent as of November 2020. The special servicer reported that a workout strategy is being determined, with the special servicer continuing discussions with the sponsor while dual tracking foreclosure. The loan’s scheduled maturity date is in May 2021. As of June 2020, the collateral occupancy was 96.0%, which remains relatively unchanged from issuance. The going-in LTV was moderate at 63.1%. As such, a 55% haircut to the issuance appraisal value of $313.0 million and a stressed advancing figure implies a relatively moderate loss severity of 30.4%. That said, there is the possibility that the sponsor will be turning the property over to the trust, and the servicer will be faced with disposing the asset in a very challenging time for regional mall properties, particularly those in secondary markets such as the subject. Therefore, DBRS Morningstar notes the loss severity could be much higher at resolution, supporting the Negative trends on certain classes.

The smaller loan in special servicing, Holiday Inn Express Anchorage, secured by a 129-key limited-service hotel in Anchorage, Alaska, transferred to the special servicer in August 2020 for imminent default because of challenges driven by coronavirus. As of November 2020, the loan was more than 90 days delinquent and the special servicer reported that the asset manager is dual tracking foreclosure while continuing discussions regarding a loan modification with the borrower. As of June 2020, the property reported an occupancy rate of 61% and DSCR of 0.98x compared with a YE2019 occupancy rate of 81% and DSCR of 1.84x. Given the outstanding delinquency and the significant challenges for the underlying collateral amid the pandemic that will make repayment at the scheduled July 2021 maturity unlikely, DBRS Morningstar analyzed this loan with an elevated probability of default to significantly increase the expected loss 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.

Class X-A is an interest-only (IO) certificate that references 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 – Park Place Mall (15.3% of the pool)
-- Prospectus ID#5 – Parkdale Mall & Crossing (6.8% of the pool)
-- Prospectus ID#13 – Champlain Centre (2.7% 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 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.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

Ratings

  • Date IssuedDebt RatedRatingTrendActionAttributesi
    10-Dec-20Commercial Mortgage Pass-Through Certificates, Series 2011-GC5, Class BAA (high) (sf)NegDowngraded, Trend Change
    US
    10-Dec-20Commercial Mortgage Pass-Through Certificates, Series 2011-GC5, Class CA (sf)NegDowngraded, Trend Change
    US
    10-Dec-20Commercial Mortgage Pass-Through Certificates, Series 2011-GC5, Class DBB (sf)NegDowngraded, Trend Change
    US
    10-Dec-20Commercial Mortgage Pass-Through Certificates, Series 2011-GC5, Class FC (sf)--Int. in Arrears, Downgraded
    US
    10-Dec-20Commercial Mortgage Pass-Through Certificates, Series 2011-GC5, Class A-3AAA (sf)StbConfirmed
    US
    10-Dec-20Commercial Mortgage Pass-Through Certificates, Series 2011-GC5, Class A-4AAA (sf)StbConfirmed
    US
    10-Dec-20Commercial Mortgage Pass-Through Certificates, Series 2011-GC5, Class A-SAAA (sf)StbConfirmed
    US
    10-Dec-20Commercial Mortgage Pass-Through Certificates, Series 2011-GC5, Class X-AAAA (sf)StbConfirmed
    US
    10-Dec-20Commercial Mortgage Pass-Through Certificates, Series 2011-GC5, Class ECCC (sf)--Downgraded
    US
    10-Dec-20Commercial Mortgage Pass-Through Certificates, Series 2011-GC5, Class X-BDiscontinued--Disc.-W/drwn
    US
    More
    Less
GS Mortgage Securities Trust 2011-GC5
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

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