DBRS Morningstar Confirms All Ratings of GS Mortgage Securities Corporation Trust 2019-GC40

DBRS, Inc. (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2019-GC40 issued by GS Mortgage Securities Corporation Trust 2019-GC40 as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class X-B at A (high) (sf)
-- Class C at A (sf)
-- Class D at BBB (high) (sf)
-- Class X-D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class X-F at BB (high) (sf)
-- Class F at BB (sf)
-- Class G-RR at B (sf)

Additionally, DBRS Morningstar confirmed its ratings to the following rake bonds (the Rake Bonds), which are secured by the beneficial interest in the subordinate debt placed on the Diamondback Industrial Portfolio 1 (Prospectus ID#14) and Diamondback Industrial Portfolio 2 (Prospectus ID#1) loans:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction. At issuance, the transaction consisted of 35 fixed-rate loans secured by 44 commercial and multifamily properties with a trust balance of $1.03 billion. According to the June 2021 remittance, all loans from issuance remain in the pool with minimal amortization to date. The transaction is concentrated by property type as 15 loans, representing 53.7% of the current trust balance, are secured by office and industrial properties while the third-largest concentration, representing 19.8% of the current trust balance, are secured by mixed-use assets.

The Waterford Lakes Town Center loan (Prospectus ID#10; 3.29% of pool) is the pool’s only specially serviced loan. The loan is secured by the fee simple interest in a 691,265-square-foot (sf) regional retail shopping center in Orlando . The property is shadowed-anchored by Target, Ashley Furniture, and LA Fitness, while collateral anchor tenants include Regal Cinemas, Best Buy, Jo-Ann Fabric, and Bed Bath & Beyond. The loan transferred to special servicing in April 2021 for imminent nonmonetary default after the borrower requested a temporary waiver of any and all bankruptcy events of default and any penalties and costs as a result of such action. The loan’s sponsor, Washington Prime, filed for bankruptcy protection in June 2021. The servicer agreed to forbear all defaults triggered by any filing through July 1, 2021, for a period of 270 days. Prior to its transfer to special servicing, the property had maintained stable performance to date as the property was 98% occupied as of September 2020 with a trailing-12-months debt service coverage ratio of 1.34 times (x). Washington Prime continues to categorize the property as one of its Tier 1 properties.

The pool’s largest loan, Diamondback Industrial Portfolio - 2 (Prospectus ID#1; 8.2% of pool), has a whole loan balance of $139 million, of which $78 million of senior debt is included in the pooled classes while the subordinate $61 million component is tied to the raked classes. The loan is secured by the fee-simple interest in a portfolio of three single-tenant industrial properties totaling more than 2.5 million sf located in Pennsylvania, Tennessee, and Virginia. The portfolio is 100% leased to investment-grade single tenants: Nestlé S.A. (Nestlé; rated AA (low) with a Stable trend by DBRS Morningstar); The Home Depot, Inc. (The Home Depot; rated “A” with a Stable trend by DBRS Morningstar); and Amazon.com, Inc. (Amazon). All of the properties were build-to-suit projects and have been the only occupants at their respective buildings. Nestlé has occupied the property since 1994, while The Home Depot and Amazon have occupied their spaces since 2008 and 2011, respectively. All three tenants have leases extending beyond the loan term.

The second loan that is tied to the raked classes is associated with the Diamondback Industrial Portfolio - 1 (Prospectus ID#14; 7.8% of pool). The loan has a whole loan balance of $130.3 million, of which $20 million senior debt is included in the pool classes. The subordinate $60.3 million note is tied to the raked classes. The loan is secured by the fee-simple interest in a portfolio of three single-tenant industrial properties totaling more than 2.2 million sf located in South Carolina, Pennsylvania, and Wisconsin. The portfolio is 100% leased to investment-grade single tenants: Amazon, T.J. Maxx, and FedEx. All three tenants are on leases that extend beyond the loan term.

As of the June 2021 remittance, there are just seven loans, representing 8.2% of the pool, on the servicer’s watchlist.

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/373262.

Classes X-A, X-B, X-D, and X-F 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 ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer 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 methodology is North American CMBS Surveillance Methodology (March 26, 2021), 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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