DBRS Morningstar Downgrades One Class, Confirms Three Classes of GSMS 2013-GCJ14

DBRS, Inc. (DBRS Morningstar) downgraded its credit rating on one class of Commercial Mortgage Pass-Through Certificates, Series 2013-GCJ14 issued by GS Mortgage Securities Trust 2013-GCJ14 as follows:

-- Class G to C (sf) from CCC (sf)

DBRS Morningstar also confirmed its credit ratings on three classes as follows:

-- Class D at BBB (sf)
-- Class E at BB (high) (sf)
-- Class F at B (low) (sf)

The credit ratings for Classes C and PEZ were discontinued in conjunction with this rating action, as they have been repaid in full. Classes D, E, and F maintain Stable trends. Class G is assigned a credit rating that typically does not carry a trend in commercial mortgage-backed securities (CMBS) credit ratings.

The downgrade action is driven by an increase in DBRS Morningstar’s loss projections and increased pool concentration given the repayment of most of the performing loans in the past year. Since DBRS Morningstar’s last rating action, 64 loans have repaid from the trust, and the pool has paid down by 89.4% since issuance. As of the October 2023 remittance, only six loans are remaining, five of which are in special servicing, representing 77.4% of the pool. All but one of the specially serviced loans recently transferred because of maturity default. Given this concentration, DBRS Morningstar’s ratings are based on a recoverability analysis of the outstanding assets. DBRS Morningstar’s current loss projections are contained to the Class G certificate and indicate that Classes D, E, and F remain sufficiently insulated, though there is increased propensity for interest shortfalls.

Cranberry Woods Office Park (Prospectus ID#4, 32.4% of the pool) is the largest loan in the pool and the largest asset in special servicing. It is secured by a portfolio of three suburban office properties located approximately 20 miles north of Pittsburgh. The loan transferred to special servicing in August 2023 for maturity default. According to servicer commentary, the borrower had previously indicated it was looking for refinance options. One of the three collateral buildings is 100% occupied by Genco (30.9% of the collateral net rentable area (NRA)), an affiliate of FedEx, on a lease expiring in December 2023. The space is not currently listed as available, but the loss in rental revenue from this tenant would significantly affect overall cash flow. The loan had nearly $5.0 million in reserves as of the October 2023 reporting. DBRS Morningstar’s analysis is based on a conservative stress to the issuance appraised value, as there is no updated appraisal available at this time, with a resulting implied loss severity under 20%.

The only performing loan is Mall St. Matthews (Prospectus ID#6, 22.6% of the pool), which is 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. A modification of the loan was executed in March 2022, terms of which included an extension of the maturity date to June 2025, as well as a conversion to interest-only payments throughout the extension period. The loan is also cash managed with all excess cash applied to paydown the principal balance. As of the October 2023 remittance, the loan continues to perform in accordance with the modification terms. A June 2023 sales report indicated average in-line sales for the trailing 12 months were $483 per square foot. The annualized June 2023 debt service coverage ratio was reported to be 1.46 times (x), compared with 1.59x at YE2022, 1.60x at YE2021, and 1.69x at YE2020. The collateral was 91.0% occupied as of June 2023, down slightly from 93% at YE2022, and leases representing 23.9% of the NRA are already expired or scheduled to roll in the next 12 months.

The loan is pari passu with a note securitized in GSMS 2013-GCJ13, which is not rated by DBRS Morningstar. According to previous servicer’s commentary, the loan will 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, 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 potential of a significant loss at resolution remains high.

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/416784 (July 4, 2023).

All credit ratings are subject to surveillance, which could result in credit 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 credit rating was initiated at the request of the rated entity.

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

This is a solicited credit rating.

DBRS Morningstar notes that a sensitivity analysis was not performed for this review as the transaction is in wind-down, with only a few loans remaining. In those cases, the DBRS Morningstar credit ratings are typically based on a recoverability analysis for the remaining loans.

DBRS, Inc.
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Chicago, IL 60602 USA
Tel. +1 312 332-3429

The credit 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)

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 22, 2023; https://www.dbrsmorningstar.com/research/420982)

North American Commercial Mortgage Servicer Rankings (August 23, 2023; https://www.dbrsmorningstar.com/research/419592)

Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023; https://www.dbrsmorningstar.com/research/415687)

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].