DBRS Morningstar Confirms Ratings on All Remaining Classes of GS Mortgage Securities Trust, 2010-C1

DBRS Limited (DBRS Morningstar) confirmed its ratings on all remaining classes of the Commercial Mortgage Pass-Through Certificates, Series 2010-C1 issued by GS Mortgage Securities Trust, 2010-C1 as follows:

-- Class B at AAA (sf)
-- Class C at A (high) (sf)
-- Class D at C (sf)

Classes B and C are maintained with Stable trends, while Class D has a rating that does not carry a trend.

The ratings reflect the stable performance outlook and recoverability expectations for the transaction’s remaining two loans, Mall at Johnson City (Prospectus ID#6, 53.5% of current pool balance) and Grand Central Mall (Prospectus ID#7, 46.5% of the current pool balance). As of the January 2023 remittance, both loans are current and performing; however, they are on the servicer’s watchlist for upcoming maturities in May 2023 and July 2023, respectively. The two outstanding loans have a cumulative balance of $77.0 million, representing collateral reduction of 90.2% since issuance, and 1.3% since DBRS Morningstar’s last rating action in June 2022.

The sponsorship for both loans is provided by the Washington Prime Group Inc. (WPG), a real estate investment trust that invests primarily in retail properties. In June 2021, WPG had filed for chapter 11 bankruptcy protection; however, the borrowing entities for each of the trust loans were not included in any of the WPG bankruptcy filings. At the time, both assets were considered tier 1 (core) assets, suggesting a longer-term commitment as compared with those categorized in lower tiers. WPG emerged from bankruptcy in October 2021.

Mall at Johnson City is a regional mall in Johnson City, Tennessee, approximately 120 miles from Knoxville. The loan was modified in December 2019 which extended the maturity to May 2023, with two one-year extension options. The terms of the modification required the borrower to make a $5.0 million principal curtailment that was due in May 2020, deposit an additional $10.0 million into various reserves, and remain in cash management. The servicer confirmed that the borrower plans on exercising its first one-year extension option, pushing the maturity date to May 2024. According to the loan modification agreement, the borrower will be required to pass a net operating income (NOI) debt yield test of 11.5%, in addition to paying the special servicer a fee equal to 25 basis points for each extension. As of the most recent financial reporting on file, the loan meets the required threshold with a YE2021 and trailing nine months (T-9) ended September 2022 (annualized) NOI debt yield of 15.1% and 15.9%, respectively.

According to the September 2022 rent roll, the occupancy rate at the property was 96.7%, unchanged from the last rent roll received in March 2022. Sears, previously an anchor tenant, vacated in January 2020. Remaining anchors include JCPenney, Belk Home Store, Belk for Her, and Dick’s Sporting Goods. Belk Home Store (80,000 square feet (sf); 15.3% of NRA) recently extended its lease from January 2023 to June 2027, with one additional five-year extension option. Scheduled lease rollover within the next 12 months is moderate, with leases representing approximately 9.5% of the NRA set to roll. The largest tenant with an upcoming lease expiration is Forever 21 (222,229 sf; 4.3% of NRA; lease expiration in January 2023). DBRS Morningstar has reached out to the servicer to confirm if the tenant renewed its lease; the store is still listed on the mall’s website. Sales of $192.59 per square foot (psf) for the trailing 12-month (T-12) period ended August 2022 were lower than the previously reported figure of $246 psf for the T-12 period ended November 2021. However, the T-9 September 2022 debt service coverage ratio (DSCR) was 1.85 times (x), an increase from the YE2021 DSCR of 1.75x, primarily the result of a decrease in operating expenses.

Grand Central Mall is a regional mall in Vienna, West Virginia, which is located along the Ohio-West Virginia border. The loan was modified in 2020, at which time the special servicer approved a maturity date extension to July 2021. A second maturity extension was subsequently negotiated in June 2021, pushing the maturity date out to July 2023, with two additional one-year extension options, pursuant to the subject meeting an 11.0% NOI debt yield. The servicer has reached out to the borrower to confirm its plans for the upcoming loan maturity. As of the most recent financial reporting, the loan would meet the required NOI debt yield threshold with YE2021 and T-9 ended September 2022 (annualized) figures of 17.6% and 16.4%, respectively.

According to the September 2022 rent roll, the property was 97.0% occupied, unchanged from the last rent roll received in March 2022. The former Sears anchor box, which was demolished in March 2019, was redeveloped for new tenants TJ Maxx, HomeGoods, and PetSmart, which have all been open and operating since July 2021. Sales of $209.84 psf for the T-12 period ended August 2022 was higher than the last reported figure of $184 psf for the T-12 period ended February 2022. Scheduled lease rollover within the next 12 months is minimal, with leases representing approximately 5.5% of NRA set to roll. The T-9 September 2022 debt service coverage ratio (DSCR) was 2.05 times (x), an increase from the YE2021 DSCR of 1.59x.

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 (May 17, 2022).

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 (October 3, 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.

DBRS Morningstar notes that a sensitivity analysis was not performed for this review as the transaction is in wind down, with only one (or a few) remaining loan(s). In those cases, the DBRS Morningstar ratings are typically based on a recoverability analysis for the remaining loan(s).

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

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