DBRS Morningstar Confirms All Ratings on GS Mortgage Securities Trust 2015-GC28

DBRS Limited (DBRS Morningstar) confirmed all ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-GC28 (the Certificates) issued by GS Mortgage Securities Trust 2015-GC28 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 X-B at AAA (sf)
-- Class B at AAA (sf)
-- Class C at A (high) (sf)
-- Class PEZ at A (high) (sf)
-- Class D at BBB (low) (sf)
-- Class X-C at BB (sf)
-- Class E at BB (low) (sf)
-- Class F at CCC (sf)

All classes have Stable trends, with the exception of Class F, which has a rating that does not typically carry a trend in commercial mortgage-backed securities (CMBS) ratings. The rating confirmations reflect the stable performance of the transaction since the last rating action. DBRS Morningstar expects the pool will continue to exhibit stable to improving performance.

Per the May 2023 remittance, 60 of the original 74 loans remain in the pool, with an aggregate principal balance of $676.6 million, representing a collateral reduction of 25.9% since issuance. Since the last rating action in November 2022, three loans have been fully defeased, bringing the total defeased collateral to 49.3% of the pool. The three largest property type concentrations for non-defeased loans are retail (12.5% of the pool), office (9.0% of the pool), and lodging (7.0% of the pool). The same four loans, currently representing 4.1% of the pool, that were in special servicing at the time of the last rating action remain in special servicing and two of them are pending return to the master servicer.

The majority of office properties in the transaction maintained healthy credit metrics since last review with a weighted-average (WA) debt service coverage ratio (DSCR) of 1.68 times (x). In general, the office sector has been challenged, given the low investor appetite for the property type and high vacancy rates in many submarkets as a result of the shift in workplace dynamics. In the analysis for this review, loans backed by office and other properties that were showing declines from issuance or otherwise exhibiting increased risks from issuance were analyzed with stressed scenarios to increase expected losses as applicable. As a result, office properties exhibited a WA expected loss that was 30% greater than the pool average.

The largest loan in special servicing, Iron Horse Hotel (Prospectus ID#11; 2.4% of the pool), is secured by a six-story, 100-key, full-service hotel in Milwaukee. The loan was transferred to the special servicer in April 2020 stemming from noncompliance issues prior to the onset of the Coronavirus Disease (COVID-19) pandemic. The borrower has since filed for bankruptcy protection, while the lender dual-tracks litigation. Discussions are ongoing between the property management and the lender regarding a transfer of ownership. The loan experienced a decrease in room and food and beverage revenue as a result of new competition within the market and the lingering effects of the pandemic. As of the trailing 12-month period ended December 31, 2022, the hotel was outperforming its competitive set with occupancy rate, average daily rate, and revenue per available room penetration rate of 104.3% (-13.9% year over year), 114.9% (+6.5%), and 119.9% (-8.4%), respectively. An updated appraisal completed in December 2022 valued the property at $25.0 million, a 3.8% decrease from the March 2022 appraised value of $26.0 million and a 14.4% decrease from the issuance appraised value of $29.2 million. DBRS Morningstar’s analysis includes an additional stress to elevate the loan’s expected loss.

The largest loan on the watchlist, MacDade Retail (Prospectus ID#7; 2.8% of the pool), is secured by a four-building, 262,000 square-foot (sf) anchored retail property in Holmes, Pennsylvania. The loan was returned to the master servicer in March 2021 as a corrected mortgage after transferring to special servicing in June 2020 for imminent monetary default after the anchor tenant Kmart (40.3% of net rentable area (NRA)) vacated. The loan remains on the servicer’s watchlist given the low property occupancy. The property was 57.6% occupied at YE2022, an increase from 51.6% at YE2021 but well below the issuance occupancy of 97.3%. Per the December 2022 rent roll, the second largest tenant, Marmaxx Operating Corp. (10.2% of NRA), has a lease expiration scheduled for August 2023. According to servicer updates, the tenant renewed its lease for an additional five-year term. The servicer confirmed the borrower’s plans to split the 105,000-sf former Kmart space in an effort to backfill with multiple tenants, but nothing official has yet been executed. Prospective tenants include Five Below, America’s Best, Sketchers, Ace Hardware, Arby’s, and Wawa. Within a five-mile radius of the property, retail vacancy rates remain low at 6.0% as of YE2022, which may bode well for the borrower’s efforts to backfill the vacant anchor space. Given the low occupancy rate and lack of leasing activity, DBRS Morningstar has applied a stressed probability of default to the loan in its analysis.

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 (May 17, 2022).

Classes X-A, X-B, X-C, X-D, X-E, and are interest-only (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.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology (March 16, 2023; https://www.dbrsmorningstar.com/research/410912).

Other methodologies referenced in this transaction are listed at the end of this press release.

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 rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action.

DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

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.

DBRS Limited
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Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

North American CMBS Multi-Borrower Rating Methodology (March 16, 2023)/North American CMBS Insight Model v 1.1.0.0 (https://www.dbrsmorningstar.com/research/410913)

Rating North American CMBS Interest-Only Certificates (December 19, 2022; https://www.dbrsmorningstar.com/research/407577)

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 12, 2022; https://www.dbrsmorningstar.com/research/402646)

North American Commercial Mortgage Servicer Rankings (September 8, 2022; https://www.dbrsmorningstar.com/research/402499)

Interest Rate Stresses for U.S. Structured Finance Transactions (August 30, 2022; https://www.dbrsmorningstar.com/research/402153)

Legal Criteria for U.S. Structured Finance (December 7, 2022; https://www.dbrsmorningstar.com/research/407008)

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