DBRS Morningstar Confirms All Ratings on GS Mortgage Securities Trust 2020-GC45, Removes Two Classes from Under Review with Negative Implications

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2020-GC45 issued by GS Mortgage Securities Trust 2020-GC45 as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 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 X-B at A (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (high) (sf)
-- Class X-D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F-RR at BB (low) (sf)
-- Class G-RR at B (sf)

In addition, Classes F-RR and G-RR were removed from Under Review with Negative Implications, where they were placed on August 6, 2020. All trends are Stable.

DBRS Morningstar also confirmed the loan-specific certificates as follows:

-- Class SW-A at A (low) (sf)
-- Class SW-B at BBB (low) (sf)
-- Class SW-C at BB (low) (sf)
-- Class SW-D at B (low) (sf)

All trends are Stable.

The ratings confirmations reflect the overall stable performance of the underlying loans in the transaction. At issuance, the trust consisted of 52 fixed-rate loans secured by 152 commercial, hospitality, and multifamily properties with an original balance of $1.39 billion. As of the December 2020 remittance report, all of the original loans remain in the pool and there has been nominal collateral reduction of 0.08% since issuance. Amortization has generally been limited as 29 of the loans representing 68.2% of the current pool balance are structured as interest-only (IO) and 17 loans representing another 26.5% are structured as partial-IO and remain in their IO periods. The collateral pool’s property type concentration is relatively diverse, with the greatest property type concentration by loan balance consisting of mixed-use assets (eight loans accounting for 23.2% of the current pool balance). Retail assets account for the second greatest property type concentration, with 15 loans that represent 21.7% of the current pool balance. There are four loans secured by lodging properties, which have been particularly hard-hit by the global Coronavirus Disease (COVID-19) pandemic; however, the concentration is relatively small as these loans make up only 9.3% of the current pool balance.

At issuance, DBRS Morningstar assigned an investment-grade shadow rating to eight loans (seven of which were included in the 15 largest loans): Prospectus ID#1 – 1633 Broadway (4.5% of current pool); Prospectus ID#2 – 560 Mission 1 (4.5% of current pool); Prospectus ID#3 – Starwood Class A Industrial Portfolio 1 (4.5% of current pool); Prospectus ID#4 – Bellagio Hotel and Casino (4.5% of current pool); Prospectus ID#5 – Southcenter Mall (4.5% of current pool); Prospectus ID#8 – 650 Madison Avenue (3.8% of current pool); Prospectus ID#14 – Parkmerced (2.8% of current pool); and Prospectus ID#17 – 510 East 14th Street (2.6% of current pool). With this review, DBRS Morningstar confirmed that the respective performance of each of these loans remains consistent with the characteristics of an investment-grade loan.

As of the December 2020 remittance period, there were five loans representing 9.3% of the current pool balance on the servicer’s watchlist, including two loans representing 7.8% of the pool in the 15 largest loans. These five loans are being monitored for a variety of reasons including a low debt service coverage ratio (DSCR) and/or requests from the respective borrowers for coronavirus relief. There were no loans in special servicing and no delinquent loans as of the December 2020 remittance. The two largest loans on the servicer’s watchlist were Prospectus ID#7 – Van Aken District (4.0% of current pool) and Prospectus ID#11 – Crystal Springs Resort (3.8% of current pool).

The largest watchlisted loan, Prospectus ID#7 – Van Aken District, is secured by a 237,574 square-foot (sf) mixed-use development in Shaker Heights, Ohio. The loan was added to the servicer’s watchlist in November 2020 after the DSCR fell below 75% of the issuer’s DSCR due to the ongoing effects of the coronavirus. The subject consists of 80,118 sf of retail space, 62,961 sf of office space, and 103 multifamily units, and was built in phases during 2005 and from 2018 to 2019. Tenancy is granular, as no tenant makes up more than 8.0% of the net rentable area (NRA), and primarily consists of local retailers and some regional and national office tenants. The September 2020 rent roll for the commercial portion of the property shows that the property was 84.8% leased, including the fourth-largest tenant, Beauty Shoppe (3.4% of NRA), which operates as a co-working space. According to the borrower, the pandemic meant a delay in the tenant’s opening at the property and as a result, most of the rent due for 2020 was forgiven, contributing to the cash flow declines for the property. Meanwhile, the multifamily portion of the property reported a June 2020 rent roll with an occupancy rate of 95.1%. The servicer reported a trailing six months ended June 2020 DSCR of 1.25 times (x), compared to the issuer’s DSCR of 2.36x.

The second-largest watchlisted loan, Prospectus ID#11 – Crystal Springs Resort, is a five-year loan secured by the rental interests in the privately owned condominium hotel units in two full-service hotel properties, both of which are located in Hamburg, New Jersey (50 miles west of Manhattan). Together, the two properties offer a total of 457 keys, and at issuance, 419 were participating in the property’s rental management program, whereby the property management team rents the participating units as if they were typical hotel units. The collateral also includes the borrower’s fee interest in six golf courses with five clubhouses and the ownership interest in 12 food and beverage outlets, all situated on a total of 232 acres.

The loan was added to the servicer’s watchlist in August 2020 after the DSCR fell below the 75% of the issuer’s DSCR. The servicer reported a trailing 12 months ended September 2020 DSCR of 1.34x, which was a sharp decrease from the issuer’s DSCR of 3.93x and suggested a full year’s cash flows with the impact of the coronavirus realized would show a coverage ratio well below breakeven. The watchlist commentary notes that the hotel portion of the property was closed for April and May 2020. DBRS Morningstar has requested further information from the servicer.

The loan-specific certificates represented by Classes SW-A, SW-B, SW-C, and SW-D are backed by the $65.5 million subordinate companion loan of the $210 million Starwood Industrial Portfolio whole loan, which is secured by a portfolio of 33 industrial properties (including 24 warehouses, three distribution centers, two manufacturing facilities, two cold storage facilities, and two flex spaces) totaling 4.1 million sf across four states (Indiana, Illinois, Ohio, and Wisconsin). The loan-specific certificates are not pooled with the remainder of the trust loans. With this review, DBRS Morningstar confirmed that the performance of the underlying loan remains in line with the expectations at issuance, supporting the rating confirmations for those classes.

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 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 this transaction.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes loan-level 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 at dbrsmorningstar.com/about/methodologies. 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.

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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