DBRS Morningstar Confirms Ratings on All Classes of GS Mortgage Securities Trust 2013-G1

DBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2013-G1 issued by GS Mortgage Securities Trust 2013-G1 as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (low) (sf)
-- Class DM at BB (sf)

All trends are Stable.

The rating confirmations and Stable trends are reflective of DBRS Morningstar's view that the underlying collateral, while composed of three mall properties, is generally performing quite well, with strong sponsorship in place for all three loans and recent developments that suggest that a refinance or short-term extension at the 2022 and 2023 maturity dates is likely.

The trust collateral consists of three fixed-rate loans individually secured by two outlet malls and one regional mall: Great Lakes Crossing Outlets (Auburn Hills, Michigan), Katy Mills (Katy, Texas), and Deptford Mall (Deptford, New Jersey), located in established suburban markets outside of Detroit, Houston, and Philadelphia, respectively. The three loans reported an aggregate outstanding principal balance of $483.2 million as of the July 2022 remittance, representing a collateral reduction of 11.2%. The trust debt amount is inclusive of the Deptford Mall subordinate B note, which backs the directed certificate Class DM. Collateral reduction for the trust has been due to amortization of the Great Lakes Crossing Outlets and Deptford Mall loans. The Katy Mills loan is interest only (IO) for the entire term.

Great Lakes Crossing Outlets, representing 37.2% of the allocated pool balance, is secured by a 1.1 million-square-foot (sf) portion of a 1.4 million-sf outlet center in Auburn Hills, built in 1998 and renovated in 2010 by the former sponsor, Taubman Centers, Inc. (Taubman). Simon Property Group (Simon) acquired Taubman in late 2020; Simon is now the loan sponsor, and a Simon affiliate serves as the property manager. The 30-year loan matures in January 2023 and amortizes according to a 30-year schedule. The loan is shadow-anchored by a noncollateral 25-screen AMC Theatres location as well as a Bass Pro Shops Outdoor World. As of the March 2022 rent roll, the collateral occupancy was reported at 91.0%, compared with the year-end (YE) 2020 and issuance occupancy rates of 92.6% and 94.1%, respectively. The largest collateral tenants at the property are Burlington Coat Factory (Burlington) (7.2% of the net rentable area (NRA), lease expiration in January 2030), Round 1 Bowling and Amusement (5.2% of the NRA, lease expiration in September 2027), Forever 21 (4.2% of the NRA, lease expiration in January 2023), and Bed Bath & Beyond (3.9% of the NRA, lease expiration in January 2025). Including Forever 21, tenants representing 13.8% of the NRA are scheduled to expire by loan maturity. The property’s tenant mix, which includes traditional retailers, outlet formats, and entertainment options, mimics the “Mills” properties owned and operated by Simon, such as the Katy Mills property discussed below, making the subject a natural addition to the existing Simon portfolio.

As of the most recent financial reporting, the Great Lakes Crossings Outlets loan reported YE2021 debt service coverage ratio (DSCR) of 2.20 times (x), above the YE2020 DSCR of 1.92x and DBRS Morningstar DSCR of 2.04x. According to the YE2021 sales report, total sales for the mall as a whole averaged $334.40 per square foot (psf), compared with YE2020 and YE2019 figures of $220.90 psf, and $239.10 psf, respectively. While the property faces moderate rollover in the upcoming months, which could introduce some uncertainty at the 2023 maturity, DBRS Morningstar believes Simon should be generally well-positioned to obtain a replacement loan given the recent sales growth, high in-place DSCR, and strong historical performance for the collateral mall, which serves as a primary shopping destination for the Detroit area that also offers popular entertainment options such as Peppa Pig World of Play, Legoland Discovery Center, and Sea Life Aquarium.

The Deptford Mall loan, representing 33.9% of the allocated pool balance, is secured by 343,910 sf of in-line space in a 1.0 million-sf regional mall in Deptford, which is located within the Philadelphia metropolitan statistical area. As previously described, the loan was bifurcated into a $179.4 million senior loan contributed to the pooled certificates and a $25.1 million subordinate, non-pooled rake bond that backs the Class DM certificate. As of the July 2022 remittance, the senior portion of the debt had a balance of $143.7 million, while the subordinate piece supporting the rake bond had a balance of $20.1 million, representing a whole-loan collateral reduction of 20.1% since issuance. The 30-year loan matures in April 2023 and amortizes according to a 30-year schedule. The mall is owned and operated by Macerich and is anchored by noncollateral tenants including Boscov’s, Macy’s, and JCPenney (JCP). MS Portfolio, LLC has back-filled a part of the dark Sears box with a lease extending through December 2035 and another tenant, Bonesaw Brewing Company, is expected to back-fill the remainder of the space, according to a March 2022 article from Courier Post.

As of the March 2022 rent roll, the subject had a collateral occupancy rate of 94.6%, compared with the June 2021, YE2020, and YE2019 rates of 87.3%, 78.8% and 89.8%, respectively. The property benefits from a granular rent roll, with the largest tenants being Victoria’s Secret (3.2% of the NRA, lease expiration in March 2024), Go! Calendars Go! Games Go! (2.7% of the NRA, lease expiration in January 2023), and American Eagle Outfitters (2.6% of the NRA, lease expiration January in 2027). As of the trailing 12 months (T-12) ended March 2022 sales report, tenants that occupy more than 10,000 sf reported sales of $245 psf, marking an improvement from the YE2020 figure of $143 psf and the pre-Coronavirus Disease (COVID-19) figure of $214 at YE2019. Average sales for tenants less than 10,000 sf for the same time period were reported at $637 psf. The loan reported a YE2021 DSCR of 1.47x, compared with YE2020, YE2019, and DBRS Morningstar DSCR of 1.11x, 1.81x and 1.49x, respectively. There is negligible tenant rollover in the next 12 months, with tenants representing 5.9% of the NRA set to expire. Given the healthy sales trends, improvement in the occupancy rate to nearly 95% as of March 2022 and the heathy in-place DSCR, DBRS Morningstar believes Macerich should be able to refinance the loan at maturity.

Katy Mills, representing 28.9% of the allocated loan balance, is secured by a 1.2 million-sf portion of a 1.6 million-sf regional mall in the Houston suburb of Katy, Texas. The loan is the sole IO loan in the pool, with an upcoming maturity in December 2022. The loan is sponsored through a joint venture between Simon and KanAm USA LLC. Noncollateral tenants include a somewhat eclectic mix for an outlet mall in a Walmart Supercenter, a Hilton Garden Inn hotel, and a Caliber Collision in the out lot. There is also a dark former Toys “R” Us (TRU) outparcel, which has been empty since 2018 when the retailer filed bankruptcy and closed all locations. As of the December 2021 rent roll, the collateral was 83.1% occupied, compared with YE2020 and YE2019 occupancy rates of 76.1%, and 89.0%, respectively. Occupancy declined to 83.0% in 2018 with the departure of TRU and has struggled to return to the issuance level of 89.0% since. The largest collateral tenants include Bass Pro Shops (12.1% of the NRA, lease expiration in October 2024), Burlington (8.3% of the NRA, lease expiration in January 2025), AMC Cinema (6.4% of the NRA, lease expiration in October 2029), and Marshalls (2.7% of the NRA, lease expiration in January 2031).

Despite the occupancy declines, cash flows have remained healthy, with sustained growth since issuance. The YE2021 net cash flow figure of $28.5 million is well above the issuer’s figure of $21.7 million and comfortably above the YE2019 figure of $26.8 million DBRS Morningstar considered when ratings were assigned in 2020. As of the most recent financial reporting, the loan reported a very strong YE2021 DSCR of 5.75x, compared with the YE2020, YE2019, and DBRS Morningstar DSCR of 4.91x, 5.42x, and 4.15x, respectively. Updated sales were requested but have not been provided to date. Given the similarly diverse tenant mix as previously discussed for the Great Lakes Crossing Outlets property, as well as the subject’s location within a desirable Houston suburb, high coverage ratio, cash flow growth from issuance, and strong sponsorship in a JV that includes Simon, DBRS Morningstar has generally held that the loan was likely to repay at the December 2022 maturity date. This appears to have borne out, as a report from CRE Direct released in early August 2022 noted a major bank had agreed to make a $130.0 million loan that would retire the subject debt. DBRS Morningstar has requested confirmation of this from the servicer and the response is pending as of this press release.

At issuance, DBRS Morningstar shadow-rated all three loans investment grade. With this review, DBRS Morningstar confirmed that the performance of these loans remains consistent with investment-grade loan characteristics. Overall, the collateralized properties are well established draws in their respective markets and have satisfactory in-line sales performance, high-quality sponsorship, and low-leverage financing.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) 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.

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

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