Morningstar DBRS Confirms All Credit Ratings on GS Mortgage Securities Trust 2011-GC5

DBRS, Inc. (Morningstar DBRS) confirmed all its credit ratings on the Commercial Mortgage Pass-Through Certificates, Series 2011-GC5 issued by GS Mortgage Securities Trust 2011-GC5 as follows:

-- Class A-S at AAA (sf)
-- Class B at A (sf)
-- Class C at C (sf)
-- Class D at C (sf)
-- Class E at C (sf)
-- Class F at C (sf)
-- Class X-A at AAA (sf)

The trends on Classes A-S, X-A, and B are Stable. Classes C, D, E, and F have credit ratings that typically do not carry trends in commercial mortgage-backed securities (CMBS) credit ratings.

The credit rating confirmations reflect Morningstar DBRS' consistent view on the transaction, with minimal changes to loss projections for the five remaining loans, four of which are secured by regional malls in secondary or tertiary markets that have shown performance declines from issuance. Two of these loans, totaling 43.5% of the pool, are in special servicing, while two more, totaling 50.0% of the pool, are being monitored on the servicer's watchlist. Since Morningstar DBRS' last credit rating action in December 2023, the collateral remains unchanged, although one loan, totaling 36.9% of the pool, was returned to the master servicer because of a loan modification.

Given the concentration of the transaction, Morningstar DBRS based its credit ratings on a recoverability analysis using conservatively derived values for the remaining assets, which continues to indicate that losses are likely to be contained to the Class D certificate, currently rated C (sf). Morningstar DBRS remains concerned about the increased propensity for interest shortfalls should the resolution periods for the defaulted loans extend beyond the near to medium term, further exposing the trust to increased fees and expenses. Since the previous credit rating action, cumulative interest shortfalls have increased by approximately $8.0 million with the Class C certificate, currently rated C (sf), which received only 80% of the owed interest payment in the November 2024 reporting.

The transaction has been relatively insulated from losses to date, as the principal balance of the unrated Class G certificate has been eroded by only 13.1% because of realized losses, with $43.6 million of unpaid principal remaining. Both loans in special servicing became real estate owned in Q3 2023, and based on the most recent appraisals obtained from Q2 2024, the property value for both assets has declined by over 70.0% since issuance. Based on the updated values, the resulting loan-to-value ratio (LTV) for each loan exceeded 175% based on total trust exposure, and Morningstar DBRS believes loss severities exceeding 65.0% are likely for each loan, in which case the principal balance of Class D would be eroded by over 40%.

The 1551 Broadway loan (Prospectus ID#2; 36.9% of the pool) is secured by a 26,500-square foot (sf) retail property in Times Square in Midtown Manhattan. The property was initially leased to American Eagle Outfitters, Inc., who had a lease expiration in February 2024. While servicer reporting indicates that the property is vacant and the loan's debt service coverage ratio (DSCR) fell to 0.92 times (x) as of Q2 2024 from 2.40x as of YE2023, Morningstar DBRS has confirmed that the tenant is still in operations. As part of the loan modification that returned the loan to the master servicer, loan maturity was extended to December 2025 and the loan will remain on the servicer's watchlist with hard cash managed in effect until the loan is paid in full. Since the last review, the loan's principal balance has been reduced by approximately $4.2 million, with nearly $17.0 million in reserves as of the November 2024 reporting. The property was most recently appraised for $359.0 million in November 2023, consistent with the issuance appraised value of $360.0 million. The resulting LTV is 42.4%, suggesting that even in an event of adverse liquidation, loss to the trust is unlikely.

The Parkdale Mall & Crossing loan (Prospectus ID#5; 13.1% of the pool) is secured by a regional mall and adjacent strip mall in Beaumont, Texas. The loan was in special servicing from February 2021 until its return to the master servicer in October 2022 as a result of the agreed-upon maturity extension to March 2026. As of Q2 2024, the property was 71.5% occupied, with a DSCR of 0.98x. Despite the sponsor's commitment to the property and the loan's return to the master servicer, the most recent appraised value from February 2022 of $42.1 million is well below the current outstanding loan balance of $54.2 million, reflecting an LTV of 129%, and performance has since declined further. As such, Morningstar DBRS believes there is continued significant term and refinance risk associated with this loan.

The Ashland Town Center loan (Prospectus ID#9; 6.5% of the pool) is secured by a regional mall in Ashland, Kentucky. The loan transferred to special servicing in July 2021 for imminent monetary default having failed to repay ahead of its original maturity. The sponsor, Washington Prime Group Inc., was granted a loan modification in November 2022, extending the loan maturity to July 2023 with two additional one-year extension options. The borrower has since exercised both extension options with a final maturity date of July 2025. As of Q2 2024, the property reported an occupancy rate of 97.4%, with a DSCR of 2.50x. The property was most recently re-appraised in September 2022 for $42.9 million, a 9.0% increase from the 2021 appraised value but still below the issuance appraised value of $66.0 million. Based on the updated value, the resulting LTV is 62.6%. Given these factors, Morningstar DBRS believes the near-term performance outlook is stable, but this does not rule out the likelihood for potential losses should the borrower fail to pay off the loan at the extended maturity date.

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 Factors in Credit Ratings (August 13, 2024; https://dbrs.morningstar.com/research/437781).

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 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 the North American CMBS Surveillance Methodology (March 01, 2024), https://dbrs.morningstar.com/research/428798.

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

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.

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

DBRS, Inc.
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Tel. +1 312 332-3429

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

-- North American CMBS Multi-Borrower Rating Methodology (March 1, 2024), https://dbrs.morningstar.com/research/428797
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702
-- Legal Criteria for U.S. Structured Finance (October 28, 2024), https://dbrs.morningstar.com/research/441840
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283
-- Rating North American CMBS Interest-Only Certificates (June 28, 2024), https://dbrs.morningstar.com/research/435294

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