DBRS Morningstar Confirms All Classes of GS Mortgage Securities Trust 2015-GC30

DBRS Limited (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-GC30 issued by GS Mortgage Securities Trust 2015-GC30 (the Issuer) as follows:

-- 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 X-B at AA (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 (sf)
-- Class F at B (sf)

All trends are Stable with the exception of Classes E and F. DBRS Morningstar changed the trend on Class E to Negative from Stable. The trend on Class F is also Negative, and DBRS Morningstar removed the class from Under Review with Negative Implications, where it was placed on August 6, 2020.

The rating confirmations reflect the overall stable performance of the transaction, which has generally performed in line with expectations at issuance. However, there are challenges with the concentration of larger loans in special servicing, including three of the largest 15 loans in the pool, as well as the concentration of larger loans on the servicer’s watchlist, which also includes three of the top 15 loans. All of the larger loans in special servicing or on the servicer’s watchlist are backed by hotel or retail properties, which the Coronavirus Disease (COVID-19) pandemic has disproportionately affected. The generally increased risks for these loans were primary drivers for the Negative trends on Classes E and F.

As of the November 2020 remittance, there were 82 of the original 90 loans remaining in the pool with a collateral reduction of 16.4% since issuance because of amortization and loan payoffs. There were also 10 defeased loans, representing 5.5% of the pool. The weighted-average (WA) debt service coverage ratio (DSCR) for the pool was 2.41 times (x) as of the servicer’s November 2020 reporting, up from the Issuer’s WA DSCR of 2.19x at transaction closing. There have been no losses in the pool to date. As of the November 2020 remittance, five loans were in special servicing, representing 6.7% of the pool, and 20 loans were on the servicer’s watchlist, representing 22.1% of the pool.

The pool benefits from a relatively diverse property-type concentration with loans backed by multifamily properties representing the largest percentage of the pool at 22.0%. The second-largest concentration is in retail properties (21.9%), followed by office properties (19.4%) and hospitality properties (15.1%). The retail concentration is noteworthy, given the significant stress that retail properties have faced amid the coronavirus pandemic, which has significantly disrupted consumer traffic with the enforcement of social distancing guidelines. Four of the top 15 loans in the pool are backed by retail properties. Hotel properties have also been among the hardest hit by the effects of the pandemic and, although the hotel concentration in the pool is smaller, four of the largest 15 loans are backed by hotels.

The largest loan in special servicing, Hilton Scotts Valley (Prospectus ID#8; 2.4% of the pool), is secured by a full-service resort hotel known as the Hilton Santa Cruz Scotts Valley. The hotel is approximately 30 miles southwest of San Jose, California, and was sold to an affiliate of Ashford Hospitality Trust Inc. (Ashford) for $50.0 million in February 2019, well above the $39.0 million property value at issuance. This indicates that Ashford, which assumed the subject loan at transaction closing, infused new equity of $25.0 million into the property. The loan transferred to special servicing in April 2020 for imminent monetary default following the sponsor’s coronavirus relief request. The loan was reportedly current as of the November 2020 remittance, however, and the servicer reports that a proposed loan modification is under evaluation.

The property has historically performed well with previous years showing a DSCR well above 2.00x; however, the year-end (YE) 2019 DSCR was much lower at 1.14x than the historical figures. Acquisition costs or a partial-year financial statement could explain the significant year-over-year variance, but the low DSCR—particularly combined with the loan’s transfer to special servicing in April 2020—indicates increased risks since issuance. Notable mitigating factors include the recent sale and equity infusion as well as the hotel’s status as one of the only resort hotels in the area and its historically strong performance that demonstrates its appeal within the market. To capture the increased risks since issuance, DBRS Morningstar analyzed the loan with an increased probability of default (POD) to increase the expected loss for this review.

The second-largest loan in special servicing, 170 Broadway (Prospectus ID#12; 1.9% of the pool), is secured by the ground-floor retail component of a property at 170 Broadway in New York’s Financial District. The collateral sits below a Residence Inn hotel and is leased to a single tenant, the Gap, whose lease expires in February 2030. The Gap closed in March 2020 at the onset of the coronavirus pandemic and has remained closed since that time. According to news articles, the tenant is suing the loan sponsors for the right to cancel the lease, arguing that the changes in consumer traffic resulting from the pandemic mean that the retailer cannot operate as planned at the subject property. The loan transferred to special servicing in July 2020 and is over 121 days delinquent as of the November 2020 remittance. The litigation remains ongoing and the special servicer has advised that discussions between the sponsor and the servicer are on hold, given the moratorium on lender remedies that the State of New York implemented through January 2021.

The pandemic and the measures taken by local and state governments to curb public gatherings and limit close-contact opportunities have caused considerable stress on New York City retail, which is a primary driver for the loan’s default. Prior to the pandemic, however, the Gap was already reporting significant difficulty at the corporate level and some news articles suggested that the retailer, and others in similar situations, could be taking advantage of the pandemic to renegotiate lease terms or close locations as part of an effort to consolidate operations and conserve cash. The unique challenges for New York City retail and the extended loan delinquency indicate significantly increased risks since issuance and, as a result, DBRS Morningstar applied a POD penalty to increase the expected loss for this review.

The largest loan on the servicer’s watchlist, Worthington Renaissance Fort Worth (Prospectus ID#3; 1.7% of the pool), is secured by a 504-key full-service hotel in Downtown Fort Worth, Texas. The loan is on the watchlist because of the borrower’s coronavirus relief request and the servicer recently confirmed that the discussions with the borrower remain ongoing. Although the pandemic’s impacts on this hotel, and most others across the U.S., indicate increased risks since issuance, DBRS Morningstar notes that mitigating factors include the high DSCR of 2.93x at YE2019 prior to the pandemic; the sponsor’s recent $8.0 million investment in upgrades for the common areas and lobby; and the conversion of the hotel’s dining component to a Toro restaurant, a Latin steakhouse concept by celebrity chef Richard Sandoval.

The property’s significant decline in occupancy and room rates, reflected in the revenue per available room figure of $64.00 for the trailing six-month period ended June 30, 2020 (according to the property’s June 2020 Smith Travel Research report), suggest increased stress for the loan. DBRS Morningstar believes that the near- to medium-term risk for the loan remains relatively moderate, however, and expects a loan modification to be finalized in the near term. Given the low in-place revenues, DBRS Morningstar analyzed the loan with a POD penalty to 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.

Classes X-A, X-B, 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#3 – Worthington Renaissance Fort Worth (7.7% of the pool)
-- Prospectus ID#8 – Hilton Scotts Valley (2.4% of the pool)
-- Prospectus ID#12 – 170 Broadway (1.9% of the pool)
-- Prospectus ID#13 – Hampton Inn Albany (1.7% of the pool)
-- Prospectus ID#16 – Ocean Dorado (1.6% 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 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.

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