DBRS Morningstar Finalizes Provisional Ratings on GS Mortgage Securities Corporation Trust 2021-IP

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2021-IP issued by GS Mortgage Securities Corporation Trust 2021-IP (GSMS 2021-IP or the Trust):

-- 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 GSMS 2021-IP single-asset/single-borrower transaction is collateralized by the borrower’s fee-simple and leasehold interest in the nondepartment store component of International Plaza, a 1.2 million-square-foot (sf; 736,997 collateral sf) Class A super-regional mall approximately four miles west of downtown Tampa, Florida. Constructed in 2001, the collateral originally opened as a traditional, moderate shopping mall, but its tenant base has evolved over the past two decades and now features a large profile of luxury retailers such as Louis Vuitton, Gucci, and Tesla, among others. The property is anchored by a Neiman Marcus, Nordstrom, and Dillard’s, all of which own their own stores and do not serve as collateral for this transaction. While the noncollateral anchor tenants are not required to report sales, management reported that 2021 year-to-date sales have returned or exceeded those of 2019 for Nordstrom and Dillard’s. The property features two additional anchor boxes on the first and second floors of the same extension of the building. The first-floor space serves as collateral and is primarily occupied by Lifetime Athletic, while the second floor space was formerly occupied by Lord & Taylor. This space was divided up and 20,001 sf was backfilled by Ballard Designs, but there is a remaining 49,924 sf of the space that has sat vacant for approximately 10 years and is currently used as storage space. The sponsor is open to exploring an alternative use for the space, such as converting it to a coworking facility, but has no immediate intentions of doing so. The appraisal considers the space as permanent vacancy, and the space has therefore been excluded from the collateral square footage. 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.

International Plaza is well located with regard to international and domestic tourist demand as it is positioned adjacent to the Tampa International Airport and four miles west of Port Tampa Bay, which is the primary port for cruise ships in Tampa. According to a study conducted by Neilsen, tourists account for approximately 46.0% of shoppers and 47.0% of sales at the subject. Additionally, the property is well located with regard to local demand throughout the greater Tampa area, benefiting from good connectivity and accessibility via a plethora of surrounding transit options and regional thoroughfares. As of August 31, 2021, the collateral was 99.0% leased and exhibited an occupancy excluding temporary in-line stores (TILS) of 94.0%. The collateral has demonstrated generally consistent occupancy rates in recent years, with an average annual occupancy rate excluding TILS of 93.2% achieved between 2018 and 2020. Further, the overall property was (including the noncollateral Neiman Marcus, Nordstrom, and Dillard’s anchors) 99.4% leased. However, when including both the noncollateral anchors and the vacant space formerly occupied by Lord & Taylor, the overall property is approximately 95.5% leased and 92.6% occupied, excluding TILS. The mall achieved strong overall sales of $1,290 psf and total sales, excluding Apple and Tesla, of $789 psf in 2019. Predictably, overall sales and total sales, excluding Apple and Tesla, declined approximately 21.0% and 14.6%, respectively, between 2019 and 2020, largely a result of ongoing business closures and declining macroeconomic trends brought on by the onset of the Coronavirus Disease (COVID-19) pandemic. Nonetheless, the collateral has maintained monthly rent collections above 90% throughout the pandemic and stabilized at approximately 95.0% as of June 8, 2021. Additionally, over the trailing 12 months (T-12) ended May 31, 2021, the mall achieved total sales of $1,004 per sf (psf) and $820 psf when excluding Apple and Tesla. Although overall sales over the T-12 period are down from peak 2019 levels, total in-line sales, when excluding Apple and Tesla, have exceeded peak 2019 levels, evidencing a recovery from hardships brought on by the ongoing coronavirus pandemic. The in-line tenant average occupancy cost of 12.1% and 14.4%, when excluding Apple and Tesla, appears low, but there are a number of individual tenants that have not recovered to prepandemic sales figures.

Considering the collateral’s favorable location, generally consistent occupancy trends, evidence of recovering in-line sales, strong sponsorship, and ongoing transformation, DBRS Morningstar has a generally positive view of the credit characteristics of the collateral. Nonetheless, like most regional malls, the collateral will likely continue to contend with secular headwinds facing brick-and-mortar retailers in the long run, as e-commerce continues to gain traction globally. Investors should carefully consider the risks associated with investing in securities backed by regional mall properties; DBRS Morningstar published research on November 17, 2020, that highlighted that regional mall delinquencies were approaching $10 billion with an overall delinquency rate of 18.7%. For additional information, please refer to the commentary titled “CMBS Mall Delinquencies Approach $10 Billion, as the Pandemic Heightens Risk for Upcoming Maturities” on dbrsmorningstar.com.

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.

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

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

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

With regard to due diligence services, DBRS Morningstar was provided with the Form ABS Due Diligence-15E (Form-15E), which contains a description of the information that a third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While due diligence services outlined in Form-15E do not constitute part of DBRS Morningstar’s methodology, DBRS Morningstar used the data file outlined in the independent accountant’s report in its analysis to determine the ratings referenced herein.

The principal methodology is North American Single-Asset/Single-Borrower Ratings Methodology (March 2, 2021; https://www.dbrsmorningstar.com/research/374454), 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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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