DBRS Morningstar Confirms Ratings on All Classes of GSMS 2013-GCJ14

DBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2013-GCJ14 (the Certificates) issued by GS Mortgage Securities Trust 2013-GCJ14 as follows:

-- 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 (sf)
-- Class C at A (high) (sf)
-- Class PEZ at A (high) (sf)
-- Class D at BBB (sf)
-- Class E at BB (high) (sf)
-- Class F at B (low) (sf)
-- Class G at CCC (sf)

DBRS Morningstar maintained Negative trends on Classes C, PEZ, D, E, and F. Class G has a rating that does not carry a trend. All remaining trends are Stable.

DBRS Morningstar downgraded three classes and assigned Negative trends to two additional classes as part of the February 2022 rating actions. (For additional information, please see the press release dated February 1, 2022.) The rating downgrades and Negative trends with the last review were due to further deterioration in the credit profile for three loans including Mall St. Matthews (Prospectus ID#6, 3.5% of the pool), W Chicago – City Center (Prospectus ID#3, 8.0% of the pool), Indiana Mall (Prospectus ID#20), and other smaller loans. There have been some developments since February 2022, including a closed loan modification for the Mall St. Matthews loan and a transfer back to the master servicer for the W Chicago – City Center loan, and the rating actions with this review are reflective of DBRS Morningstar’s view that the risks for the driver loans remain consistent with last review.

As of the May 2022 remittance, 70 of the original 84 loans remain in the pool, representing a collateral reduction of 24.0% since issuance. The pool benefits from defeasance collateral as 21 loans, representing 15.8% of the pool balance, are fully defeased. 13 loans are on the servicer’s watchlist and only two loans are in special servicing, representing 31.9% and 4.4% of the pool, respectively. Since last review, Indiana Mall has liquidated from the trust with a smaller total loss to the trust of $7.4 million than anticipated given the most recently reported October 2021 appraisal of $3.9 million, which was well below the outstanding loan balance of $12.3 million at that time.

The Mall St. Matthews loan is a pari passu loan secured by a regional mall in Louisville, Kentucky, owned and operated by Brookfield Property Group (Brookfield). The loan failed to repay at the scheduled June 2020 maturity date and was transferred to special servicing. The loan has largely remained current on monthly payments since the transfer and, as of March 2022, a loan modification has been approved to extend the maturity date to June 2025. The loan modification also allowed for a conversion to interest-only (IO) payments throughout the extension period. In addition, the borrower contributed $7.0 million of new capital to be applied toward fees and expenses and the funding of a leasing and capital expenses reserve of approximately $6.0 million. The loan will also be cash managed with all excess cash applied to paydown the principal balance. There should be excess funds available for paydown as according to the year-end (YE) 2021 financials, the loan reported a debt service coverage ratio (DSCR) of 1.60 times (x), compared with the YE2020 of 1.69x and YE2019 of 1.96x.

According to the servicer’s commentary, the loan will also be subject to a capital event waterfall upon the 2025 maturity date, which stipulates that a minimum of $75.0 million is to be repaid to the trusts holding the pari passu debt on the property. Based on the August 2021 appraisal, the property was valued at $83.0 million, a 70.4% decline from the issuance value of $280.0 million. Although the loan modification suggests a longer-term commitment to the property for the sponsor, a factor that is likely driven by the healthy sales rebound as shown in November 2021 tenant sales report, which showed sales for in-line tenants of $489 per square foot (psf) for the trailing 12 months (T-12) ended November 2021, compared with the T-12 ended March 2019 sales of $417 psf. DBRS Morningstar believes the steep value decline from issuance and possibility that the loan modification allows for a partial recovery of equity for the sponsor at repayment (even if the loan balance isn’t repaid in full) mean the possibility of a significant loss at resolution remains high.

The W Chicago – City Center loan is secured by a 403-key full-service hotel in Chicago and has been reporting performance declines for several years, before the onset of the Coronavirus Disease (COVID-19) pandemic. The loan was transferred to the special servicer in March 2021 for payment default and has since been approved for a loan modification that allowed for a conversion to IO payments for the remaining term, with the borrower remitting funds after $1.5 million in cash management reserves was applied to cover tax payments, replenish the FF&E reserve and cover any special-servicing fees incurred during the rehabilitation period. The loan will continue to be cash managed through its August 2023 maturity and was transferred back to the master servicer as of March 2022.

Based on the April 2021 appraisal, the property was valued at $73.6 million, which is a 55.9% decrease from the issuance value of $167.0 million, and just below the outstanding loan balance of $75.5 million. At issuance, it was noted that convention activity was one of the strongest generators of lodging demand in the immediate surrounding area, with significant demand also coming from the large presence of office space within the West Loop, where the property is located within the central business district. Cash flows were affected by supply additions after issuance and the DSCR has consistently lagged expectations since 2018. Although the loan modification suggests the sponsor remains committed to the asset, the sharp value decline from issuance and the uncertainty surrounding hotel demand tied to office use and convention schedules suggests risks continue to be significantly elevated from issuance for the loan.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

DBRS Morningstar did not perform an updated model run given the lack of meaningful changes in performance since the last review. As of the previous actions published on February 1, 2022, material deviations from the North American CMBS Insight Model were reported for Classes B, C, and PEZ, as the quantitative results suggested lower ratings. The material deviations were warranted given the uncertain loan-level event risk with the loans in special servicing and on the servicer's watchlist.

Class X-A is an 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.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

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 4, 2022), 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

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 [email protected].

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 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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