Press Release

DBRS Morningstar Downgrades Two Classes of GS Mortgage Securities Trust, 2010-C1; Places Three Classes Under Review with Negative Implications

CMBS
December 29, 2020

DBRS, Inc. (DBRS Morningstar) downgraded two classes of the Commercial Mortgage Pass-Through Certificates Series 2010-C1 issued by GS Mortgage Securities Trust, 2010-C1 as follows:

-- Class E to D (sf) from C (sf)
-- Class F to D (sf) from C (sf)

In addition, DBRS Morningstar placed Classes A-2, B, and C Under Review with Negative Implications as the remaining loans in the pool did not pay off at their respective maturity dates and the underlying collateral continues to recover from their respective negative credit events.

The downgrades and assignment of Under Review with Negative Implications reflect the negative credit events experienced by the transaction as the deal begins to wind down. The Burnsville Center loan was liquidated from the trust with a realized loss of $45.1 million, which was reflected in the December 2020 remittance report. This liquidation resulted in the elimination of Classes F and G and a near total writedown of Class E. In addition, none of the three remaining loans in the deal were able to pay off as scheduled at their respective maturities in 2020.

The three remaining loans are all secured by retail properties. Two of the three remaining loans, representing 51.5% of the trust balance, were in special servicing as of the December 2020 remittance. The probabilities of default were increased for each specially serviced loans to reflect the increased default risk since issuance. Recent actions for the three remaining loans indicate the sponsors are committed to the respective collateral for the long term.

The 660 Madison Avenue Retail loan (Prospectus ID#1 – 48.5% of the trust balance) is secured by an anchored retail condominium unit in the Upper East Side of Manhattan, New York. The property was the flagship store for Barney’s and is located on the corner of Madison Avenue and 61st Street, one block east of Central Park. The loan was added to the servicer’s watchlist in October 2019 after Barney’s filed for Chapter 11 bankruptcy, which ultimately resulted in the closure of the subject location in February 2020. The loan later transferred to the special servicer in June 2020 for imminent monetary default as it was unable to refinance the loan in advance of its maturity date of July 2020. The borrower subsequently executed a loan extension and modification agreement in August 2020 that extended the loan’s maturity date to January 2022. The borrower contributed $5.9 million of equity to support operating shortfalls and cover special servicer fees and expenses. The special servicer reported the property was 48.9% occupied as of August 2020, but both tenants are expected to vacate in February 2021. Upon the ultimate refinancing of the existing debt, the borrower plans to commence a $16.9 million redevelopment of the property to covert floors three through nine to office space from its current retail use. The property conversion is speculative in nature as no tenants were identified as of August 2020. Post-transfer, the property was reappraised as prospective office space at a value of $320.0 million, a significant increase to the issuance appraised value of $222.0 million. The appraiser projected the office redevelopment to reach stabilization in August 2026 and projected the redevelopment cost to total $55.1 million. The probability of default for the loan was considerably increased given the uncertain future of the property.

Mall at Johnson City (Prospectus ID#6 – 27.1% of the trust balance) is secured by a regional mall in Johnson City, Tennessee, operated by Washington Prime Group. The mall was initially anchored by JCPenney, Sears, Belk Home Store, Belk for Her, and Dick’s Sporting Goods. Sears vacated its space in January 2020; however, the borrower announced that HomeGoods executed a lease for part of the Sears space with the tenant to take occupancy in fall 2021. According to a September 2019 appraisal report, the value of the property has declined to an as-is value of $52.0 million, down 41.2% from $88.5 million at issuance. As of December 2020, the trust balance is $42.1 million for an implied loan-to-value ratio of 80.9%. The loan transferred to special servicing in November 2019 because of its imminent maturity default. A loan modification was executed in December 2019 that consisted of an initial loan term extension to December 2020 with an extension option to May 2023, a $5.0 million principal curtailment due May 2020 (which was paid), and principal and interest payments that amortize based on a new 30-year schedule. The mall temporarily closed in March 2020 because of the Coronavirus Disease (COVID-19) pandemic but later reopened in May 2020. Per the servicer, a Standstill Agreement was executed in June 2020, which allowed deferrals of three monthly debt service payments and escrow deposits between May 2020 and August 2020 that were to be repaid over the subsequent 12 months. The borrower is permitted to use tenant improvement and leasing commission (TI/LC) and capital expenditure (capex) reserves to cover operating shortfalls. Per the December 2020 remittance report, debt service payments after August 2020 remain current and the loan is expected to be transferred back to the master servicer as a corrected loan.

Grand Central Mall (Prospectus ID#7 – 24.2% of the trust balance) is secured by a regional mall in Vienna, West Virginia, also operated by Washington Prime Group. The property began experiencing issues when Toys “R” Us closed its store at the subject in 2018 followed by the Sears vacating in January 2019. The Sears space was demolished in March 2019 and the sponsor began construction on new spaces for T.J.Maxx, Ross Dress for Less, Home Goods, and PetSmart in September 2019 with a planned delivery date in November 2020. An article in “The Parkersburg News and Sentinel” dated July 2020 reported the opening of the four new stores has been pushed back to spring 2021. The loan transferred to special servicing in April 2020 because of its imminent monetary default. A Standstill Agreement and loan modification were executed in July 2020. Terms of the agreement include an extension of the loan maturity date to July 2021 from July 2020, deferral of debt service payments between June 2020 and September 2020, and permitted use of TI/LC and capex reserves for operating shortfalls. The collateral was subsequently appraised in March 2020 for a value of $45.0 million, representing a 46.1% decline from the appraised value at issuance of $83.5 million. The loan is expected to be transferred back to the master servicer in the near term as a corrected loan.

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.

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

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 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.

This rating is Under Review with Negative Implications. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period.

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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