Morningstar DBRS Confirms Credit Ratings on All Classes of GS Mortgage Securities Corporation Trust 2021-IP

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2021-IP issued by GS Mortgage Securities Corporation Trust 2021-IP as follows:

-- Class A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class HRR at BB (low) (sf)

All trends are Stable.

The credit rating confirmations reflect the stable performance of the underlying collateral, which remains in line with Morningstar DBRS' expectations given the strong tenant mix, prime market location, and experienced sponsorship. Although there have been some fluctuations in net cash flows (NCFs) during the first few years of the loan term, the most recent figure continues to be above the Morningstar DBRS NCF derived at issuance.

The interest-only floating-rate loan is secured by the borrower's fee-simple and leasehold interest in the non-department store component of International Plaza, a 1.2 million-square-foot (sf) Class A super-regional mall, of which approximately 740,000 sf serve as collateral for the loan. The property is four miles west of downtown Tampa and is anchored by noncollateral tenants Neiman Marcus, Nordstrom, and Dillard's, all of which remain open as of this press release. The subject features two additional anchor boxes on the first and second floors: the first-floor space serves as collateral and was formerly occupied by Lifetime Athletic. The second floor was divided up, and about 20,000 sf was formerly occupied by Ballard Designs, but the remaining 50,000-sf space has been vacant for more than 10 years and is currently used as storage space.

The loan was added to the servicer's watchlist in April 2024 ahead of its upcoming October 2024 maturity date. The loan is structured with three one-year extension options for a fully extended maturity date of October 2026. Per the most recent servicer commentary, the borrower has indicated its intention to exercise the second of its three options; however, the borrower is required to enter into an interest rate cap agreement with a strike rate equal to 4.0% during each of the three extension periods. Goldman Sachs Bank USA originated the mortgage loan to Tampa Westshore Associates Limited Partnership, which is indirectly owned and controlled by the Taubman Realty Group LLC; Simon Property Group, L.P.; Nuveen; and the Teachers Insurance and Annuity Association of America-College Retirement Equities Fund. It was noted at issuance that the sponsor plans to invest approximately $20.2 million in capital expenditure through the fully extended loan term with an estimated $6.6 million for the property's roof.

As of the May 2024 rent roll, the collateral was 80.8% occupied, a decline from the YE2023 rate of 89.0% and YE2022 rate of 95.9%. The decline was primarily attributable to the departure of Lifetime Athletic (7.6% of the net rentable area (NRA)), Ballard Designs (2.7% of the NRA), and Forever 21 (4.7% of the NRA). Morningstar DBRS has inquired about the ongoing leasing efforts to backfill the vacant units. Currently, the largest collateral tenants include Restoration Hardware (5.9% of the NRA, lease expiry in January 2031); Crate & Barrel (4.5% of the NRA, lease expiry in January 2029), which executed a five-year renewal; and H&M (2.9% of the NRA, lease expired in January 2024). Morningstar DBRS has inquired about the status of the H&M lease as the tenant shows as open on the property's online directory. Despite the dip in occupancy, the property still features a strong tenant mix with a number of upscale retailers, including Tiffany & Co., Burberry, Saint Laurent, Gucci, and others. Near-term rollover risk is heightened with leases representing approximately 10.0% of the NRA scheduled to roll within the next 12 months.

An updated tenant sales report was not provided. According to the YE2022 report, when excluding Apple, Tesla, and Louis Vuitton, in-line sales totaled $984 per square foot (psf) compared with the YE2021 figure of $833 psf. According to the most recent financials, the loan reported an annualized NCF for the trailing three-month period ended March 31, 2024, of $52.4 million, compared with the YE2023 and YE2022 NCF of $47.6 million and $51.2 million, respectively. The most recent annualized debt service coverage ratio has decreased despite an uptick in NCF, which was primarily attributable to the floating-rate nature of the loan, with debt service payments nearly double those in YE2022; however, this is generally mitigated by the interest rate cap agreement required with each extension option.

Morningstar DBRS maintained its issuance analysis with this review, which includes a Morningstar DBRS value of $549.6 million, based on a capitalization rate of 7.0% and a Morningstar DBRS NCF of $38.4 million. This results in a loan-to-value ratio (LTV) of 86.8%, compared with the LTV of 48.9% based on the issuance appraised value of $976 million. Positive qualitative adjustments totaling 5.5% were maintained to account for the cash flow volatility given the generally stable historical occupancy and tenant sales; property quality given its appeal to upper-moderate price point consumers; and market fundamentals for the subject's location, which caters to international and domestic tourism demand.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (January 23, 2024) at https://dbrs.morningstar.com/research/427030.

All credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

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

The principal methodology is North American CMBS Surveillance Methodology (March 1, 2024), https://dbrs.morningstar.com/research/428798.

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

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 info-DBRS@morningstar.com.

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.

Morningstar DBRS 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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

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

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

-- North American Single-Asset/Single-Borrower Ratings Methodology (July 11, 2024), https://dbrs.morningstar.com/research/436004
-- Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024), https://dbrs.morningstar.com/research/428623
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (June 28, 2024), https://dbrs.morningstar.com/research/435293
-- North American Commercial Mortgage Servicer Rankings (August 23, 2023), https://dbrs.morningstar.com/research/419592
-- Legal Criteria for U.S. Structured Finance (April 15, 2024), https://dbrs.morningstar.com/research/431205

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279.

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.