DBRS Morningstar Confirms Ratings on All Classes of GS Mortgage Securities Trust 2011-GC5, Removes Negative Trend on One Class

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

-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at C (sf)
-- Class D at C (sf)
-- Class E at C (sf)
-- Class F at C (sf)

DBRS Morningstar changed the trend on Class B to Stable from Negative. All other trends remain Stable with the exceptions of Classes C, D, E, and F, which are assigned ratings that generally do not carry a trend for Commercial Mortgage Backed Securities (CMBS) ratings. Classes D, E, and F continue to have Interest in Arrears. The rating confirmations and Stable trends reflect the generally stable outlook for losses for the remaining loans in the pool, as further described below. The barbelled rating profile for the transaction is largely the result of the concentration of loans secured by regional malls in secondary and tertiary markets that have shown performance declines from issuance.

As of the July 2022 remittance, there are five loans remaining in the pool, all of which are in special servicing. There has been a collateral reduction since issuance of approximately 73.5%. The transaction has been relatively insulated from losses to date, with the $50.2 million first loss piece in the unrated Class G certificate reduced by approximately $6.6 million since issuance.

The largest loan, 1551 Broadway (Prospectus ID#2, 37.2% of the pool), is secured by a retail property in Times Square in midtown Manhattan. The loan transferred to special servicing in November 2021 for maturity default and is flagged as a performing matured balloon loan. The borrower was unable to pay off the loan at the scheduled maturity in July 2021 and entered into a 120-day forbearance. However, the borrower was also unable to repay the loan at the end of the forbearance period and the loan remains outstanding. The property includes a 25-story LED sign and is fully occupied by sole tenant, American Eagle Outfitters, with a scheduled lease expiration in February 2024. The loan benefits from its desirable location in Times Square, which is one of the world’s most visited tourist attractions. Prior to the Coronovirus Disease (COVID-19) pandemic, Times Square saw over 65 million visitors annually. As travel restrictions have eased over the past several months, the city of New York is projecting over 55 million visitors by the end of the year. The property was re-appraised in January 2022 at a value of $442.0 million, representing a 22.8% increase from the issuance value of $360.0 million. The resulting current loan-to-value ratio is less than 40.0%, suggesting that even in the event of an adverse liquidation scenario, a loss is unlikely. As of June 2022, servicer commentary states forbearance discussions are ongoing.

The second-largest loan, Park Place Mall (Prospectus ID#1, 34.7% of the pool), is secured by a portion of a regional mall in Tucson, Arizona. The loan transferred to special servicing in September 2020 for imminent monetary default and is flagged as a nonperforming matured balloon loan. The loan sponsor, Brookfield Properties, has previously advised the servicer that no further capital will be contributed to support the property or loan; however, more recently, servicer commentary notes discussions regarding a potential loan modification are ongoing. As of year-end (YE) 2021, the collateral portion was 83.6% occupied, and the loan reported a debt service coverage ratio (DSCR) of 1.08 times (x), remaining in line with the previous year. Sales for the trailing-12 months (T-12) ended December 31, 2021 showed in-line tenant sales were $435 per square foot (psf), a significant increase from $315 psf for the previous T-12. The property was re-appraised in July 2021 at a value of $88.0 million, significantly below the issuance value of $313.0 million. Given the possibility that Brookfield could walk away from the asset and the performance declines from issuance, DBRS Morningstar liquidated the loan with this review, resulting in an implied loss severity exceeding 65.0%.

The third-largest loan, Parkdale Mall & Crossing (Prospectus ID#5, 14.7% of the pool), is also secured by a regional mall property. The collateral is composed of a regional mall and adjacaent strip mall in Beaumont, Texas. The loan has been in special servicing since February 2021. The loan sponsor, CBL Properties (CBL), filed for bankruptcy in November 2020 and emerged from bankruptcy in November 2021. As of June 2022, servicer commentary states CBL is seeking a five-year maturity extension and discussions regarding a loan modification are ongoing. The property was 98.2% occupied at YE2021, and the loan reported a DSCR of 1.03x, with performance generally flat year over year. The property was re-appraised in February 2022 at a value of $42.1 million, significantly below the issuance value of $149.0 million. Although the sponsor’s apparent commitment to the property and loan are encouraging signs, the inability to secure replacement financing and the performance declines since issuance suggest the risks have significantly increased from issuance and a loss at resolution is likely. As such, DBRS Morningstar liquidated the loan with this review, resulting in an implied loss severity exceeding 55.0%.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

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 this transaction.

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.

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.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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