Morningstar DBRS Downgrades Seven Classes of GS Mortgage Securities Trust 2014-GC26

DBRS Limited (Morningstar DBRS) downgraded its credit ratings on seven classes of Commercial Mortgage Pass-Through Certificates, Series 2014-GC26 issued by GS Mortgage Securities Trust 2014-GC26 as follows:

-- Class A-S to A (sf) from AAA (sf)
-- Class B to CCC (sf) from AA (sf)
-- Class C to C (sf) from BB (sf)
-- Class D to C (sf) from CCC (sf)
-- Class X-A to A (high) from AAA (sf)
-- Class X-B to CCC (sf) from AA (high) (sf)
-- Class PEZ to C (sf) from BB (sf)

In addition, Morningstar DBRS confirmed the following credit ratings:

-- Class E at C (sf)
-- Class F at C (sf)

The trends on Classes A-S and X-A remain Negative. The remaining classes do not have trends as they have credit ratings that do not typically carry trends in commercial mortgage-backed security (CMBS) credit ratings.

The credit rating downgrade on Class D reflects Morningstar DBRS' increased loss projections across four of the five specially serviced loans in the transaction, which collectively represent 99.0% of the current trust balance. In its analysis, Morningstar DBRS liquidated four loans from the trust, applying conservative haircuts to the issuance or most recent appraisal values. The analysis suggests losses will fully erode the outstanding principal balance of Classes E through H as well as a significant portion of Class D. The credit rating downgrade on Class C reflects the reduced credit enhancement to the bond as a result of the loan liquidation analysis as well as Morningstar DBRS' expectation that interest shortfalls will continue to accrue on that class.

The downgrade on Class B is a result of increasing cumulative interest shortfalls affecting the bond, which have persisted since December 2024 reporting. According to the February 2025 remittance, the servicer is no longer advancing any interest due to the class as a result of the specially serviced loan concentration. Morningstar DBRS expects the servicer will continue to not advance interest up to and past the maximum Morningstar DBRS tolerance of six months for the BB or B credit rating category, justifying the credit rating downgrade to CCC (sf). While the Class A-S bondholders continue to receive the full monthly interest due, Morningstar DBRS downgraded that class and maintained a Negative trend on the class to reflect its concern that interest shortfalls may continue to accrue throughout the capital stack and potentially affect Class A-S, which has minimal cushion below it. As of the February 2025 remittance, cumulative unpaid interest totaled $11.4 million, up from $6.2 million at Morningstar DBRS' previous credit rating action in March 2024. Over the last six reporting periods, unpaid interest continues to accrue due to interest payments deemed nonrecoverable by the servicer related to the largest loan in the pool, Queen Ka'ahumanu Center (Prospectus ID#1; 31.6% of the current pool balance). With the February 2025 remittance, the 1201 North Market Street loan (Prospectus ID#2; 29.0% of the current pool balance) started accruing interest shortfalls.

As of the February 2025 remittance, six of the original 95 loans remain outstanding with a pool balance of $256.0 million. Since the previous credit rating action, 40 loans have successfully repaid from the trust with a collateral reduction of 79.6% since issuance.

The Queen Ka'ahumanu Center loan is secured by the borrower's fee-simple interest in a 570,904-square-foot (sf) mixed-use regional mall in Kahului, Hawaii, on the island of Maui. The loan initially transferred to special servicing in July 2020 and became real estate owned in July 2022. According to the January 2025 servicer commentary, there are currently no disposition plans for the property; however, in January 2024, the planning commission voted unanimously to approve the rezoning of the site to a B-3 Central Business District, allowing the subject to transform into a mixed-use property. According to the November 2024 rent roll, the subject was 73.5% occupied, a slight decrease from the November 2023 figure of 79.3%; however, approximately 18.2% of the net rentable area (NRA) is leased on a temporary basis. Over the next 12 months, there is tenant rollover risk of 18.0%, suggesting the occupancy rate may decrease further. Despite the potential opportunity for redevelopment of the site, the year-over-year decline in the property's as-is value continues to indicate a significant loss at resolution. The most recent appraisal dated June 2024 valued the property at $37.6 million, which was only a slight decline from the July 2023 appraised value of $38.5 million but well below the issuance appraised value of $120.0 million. Morningstar DBRS' analysis for the loan included a liquidation scenario based on a 20.0% haircut to the July 2024 appraisal. Inclusive of the outstanding advances and expected servicer expenses, the resulting loan loss severity was in excess of 70.0% or approximately $58.0 million.

The 1201 North Market Street loan is secured by a 447,439-sf office property in Wilmington, Delaware. The loan transferred to special servicing in November 2024 for maturity default after the borrower failed to pay off the loan. According to communication with the special servicer, it plans to pursue foreclosure but will also continue to entertain alternative workout discussions with the borrower. Prior to the loan transferring to special servicing, it was being monitored for a low debt service coverage ratio (DSCR) as property operations yielded a DSCR of 1.04 times at YE2023 and 1.08 times at Q3 2024. Performance remains depressed, as according to the June 2024 rent roll, the subject was 73.6% occupied, remaining similar to the 71.8% figure as of September 2023 and 84.5% at issuance. The largest tenants include Morris Nichols Arsht & Tunnell (18.5% of NRA; lease expiry in December 2028), DaSTOR Wilmington LLC (7.7% of NRA; lease expiry in December 2037), and The Siegfried Group (6.7% of NRA; lease expiry in October 2028).) No leases are scheduled to expire in the next 12 months. Although an updated appraisal has not been provided, Morningstar DBRS expects the property value has declined significantly since issuance given the continued depressed performance and weakened market fundamentals for the property type. Morningstar DBRS' analysis for the loan included a liquidation scenario based on a 70% haircut to the issuance appraised value of $123.0 million. Inclusive of the outstanding advances and expected future servicer expenses, the resulting loan loss severity was in excess of 60.0%, or approximately $48.0 million.

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) at https://dbrs.morningstar.com/research/437781.

Classes X-A and X-B 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 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 (December 13, 2024), https://dbrs.morningstar.com/research/444617.

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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The Morningstar DBRS Long-Term Obligation Rating Scale definition indicates that credit 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.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' outlooks and credit ratings are monitored.

DBRS Limited
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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 CMBS Multi-Borrower Rating Methodology and North American CMBS Insight Model version 1.2.0.0 (December 13, 2024), https://dbrs.morningstar.com/research/444616
-- 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 (December 3, 2024), https://dbrs.morningstar.com/research/444064
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283

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 https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.