DBRS Morningstar Confirms Certain Classes of GS Mortgage Securities Trust 2020-GC45, Removes Under Review Status

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on the following classes of the Commercial Mortgage Pass Through Certificates, Series 2020-GC45 issued by GS Mortgage Securities Trust 2020-GC45:

-- Class SW-A at A (low) (sf)
-- Class SW-B at BBB (low) (sf)
-- Class SW-C at BB (low) (sf)
-- Class SW-D at B (low) (sf)

DBRS Morningstar also removed the ratings from Under Review with Developing Implications. All trends are Stable.

On March 1, 2020, DBRS Morningstar finalized its “North American Single-Asset/Single-Borrower Ratings Methodology” (the NA SASB Methodology), which presents the criteria for which ratings are assigned to and/or monitored for North American single-asset/single-borrower (NA SASB) transactions, large concentrated pools, rake certificates, ground lease transactions, and credit tenant lease transactions. For further information on the NA SASB Methodology, please see the press release dated March 1, 2020, on the DBRS Morningstar website at www.dbrsmorningstar.com.

Before the finalization of the NA SASB Methodology, DBRS Morningstar placed the ratings for this transaction and all other DBRS Morningstar-rated transactions subject to the methodology Under Review with Developing Implications, as the proposed methodology changes were material.

To assign ratings to this transaction, DBRS Morningstar considered both the impact of the updated NA SASB Methodology and certain qualitative adjustments attributable to the ongoing Coronavirus Disease (COVID-19) pandemic on the ratings, as applicable.

Classes SW-A, SW-B, SW-C, and SW-D are loan-specific rake certificates collateralized by the subordinate companion loan component of the Starwood Class A Industrial Portfolio 1 whole loan. The loan-specific certificates are only entitled to receive distributions from, and will only incur losses with respect to, the trust subordinate companion loan. The trust subordinate companion loan was included as an asset of the issuing entity but is not part of the mortgage pool that backs the pooled certificates. No class of pooled certificates issued by GS Mortgage Securities Trust 2020-GC45 will have any interest in the trust subordinate companion loan.

This loan is secured by the borrower’s fee interest in a portfolio of 33 industrial properties, including 24 warehouses, three distribution centers, two manufacturing facilities, two cold storage facilities, and two flex spaces, totaling 4,070,396 square feet. The portfolio is located across four states in the Chicago; Indianapolis; Columbus, Ohio; and Milwaukee markets. The properties were constructed between 1991 and 2016, with an average vintage of 2005 and an average building size of 123,000 sf. The portfolio has also received $17 million of capital improvements since 2013. As of November 2019, the portfolio was 98.4% occupied, with the sole vacancy deriving from the largest property, 101 45th Street (the property is 81.2% occupied). Loan proceeds of $210.0 million plus sponsor equity of $114.6 million funded the $319.6 million acquisition of the portfolio, paid closing costs of $4.1 million, and covered reserves of $880,000. Of the $210.0 million whole loan, $144.5 million was structured as a senior note with the remaining $65.5 million as a subordinate companion loan (which collateralizes the loan-specific certificates).

DBRS Morningstar based its net cash flow (NCF) assumption on the actual level at issuance in January 2020. The resulting NCF figure was $16.07 million, and DBRS Morningstar applied a capitalization (cap) rate of 7.25%, which resulted in a DBRS Morningstar Value of $221.73 million for the portfolio—a variance of -30.59% from the appraised value of $319.45 million at issuance. The DBRS Morningstar Value implies a whole loan loan-to-value (LTV) ratio of 94.72% compared with the LTV of 65.75% based on the appraised value at issuance.

The cap rate DBRS Morningstar applied is on the lower end of the published DBRS Morningstar Cap Rate Range for industrial properties, reflecting the superior quality of the assets and their locations.

DBRS Morningstar increased the final LTV Sizing Benchmarks by 5.25% to account for positive cash flow volatility, property quality, and market fundamental characteristics.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

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

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for this transaction.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com The platform includes loan-level data for most outstanding CMBS transactions (including non-DBRS Morningstar-rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodologies are the North American Single-Asset/Single-Borrower Ratings Methodology (March 1, 2020) and North American CMBS Surveillance Methodology (March 6, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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