DBRS Morningstar Confirms All Ratings on GS Mortgage Securities Trust 2014-GC24

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2014-GC24 issued by GS Mortgage Securities Trust 2014-GC24 as follows:

-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (sf)
-- Class PEZ at A (sf)
-- Class D at BB (high) (sf)
-- Class X-C at B (high) (sf)
-- Class E at B (sf)
-- Class F at CCC (sf)

Classes C, D, E, X-C, and PEZ carry a Negative trend, while Class F does not carry any trend. The trends on the remaining classes are Stable. DBRS Morningstar removed the Interest in Arrears designation for Classes E and F after interest shortfalls were repaid with the November 2021 remittance.

The rating confirmations reflect the marginal improvements and continued performance challenges of the transaction, primarily driven by the impacts of the global Coronavirus Disease (COVID-19) pandemic. In addition to the four loans, representing 14.1% of the pool, that are in special servicing as of the November 2021 remittance, DBRS Morningstar notes that the pool has a high concentration of retail and hotel properties, collectively representing more than 40.0% of the pool. All of the loans in special servicing are secured by retail and hospitality property types with the largest specially serviced loan backed by an anchored retail property, representing 9.6% of the pool. Since DBRS Morningstar’s last review of this transaction, one previously specially serviced loan, Westwind Marketplace (Prospectus ID#57, 0.5% of the pool), was successfully returned to the master servicer. As of the November 2021 remittance, the Hampton Inn & Suites Fargo loan (Prospectus ID#26, previously 1.0% of the pool) was liquidated from the pool at a loss of $2.9 million (loss severity exceeding 30.0%). In general, the coronavirus pandemic continues to affect retail and hotel properties and, as such, the high concentration of loans backed by retail properties suggests increased risks for the pool since issuance, particularly for the lower rating categories.

As of the November 2021 remittance, 65 of the original 75 loans remain in the pool with a collateral reduction of 15.5% since issuance. Nine loans, representing 12.4% of the pool, are fully defeased. There are 12 loans, representing 34.8% of the pool, on the servicer’s watchlist for a variety of reasons, including low debt service coverage ratio (DSCR) and occupancy issues.

The largest loan in the pool and on the servicer’s watchlist is the Stamford Plaza Portfolio (Prospectus ID#1, 14.7% of the pool). The trust debt is a $135.3 million pari passu participation in a whole loan totaling $270 million. It is secured by a portfolio of four connected Class A office properties, totaling 982,483 square feet (sf) in Stamford, Connecticut. The 10-year loan’s initial five-year interest-only (IO) period ended in August 2019 and is now amortizing on a 30-year schedule through its August 2024 maturity. The loan was added to the servicer’s watchlist in October 2018 because of low occupancy and subsequent low DSCR, thus activating the cash trap.

In August 2021, the borrower and lender agreed to a forbearance and are working toward a possible relief solution. Leasing reserves are being released and deposits to the reserve account are deferred until April 2022, and will be repaid from May 2022 through April 2023. In total, there is $9.9 million across the other various reserve accounts, including replacement reserves ($4.3 million), repair reserves ($817,000), and other reserves ($4.8 million). The three largest tenants at the property each account for 5% of the NRA: Merrill Lynch (expiring in July 2023), Loxo Oncology Inc (expiring in February 2028), and Berkley Facultative Reinsurance (expiring in June 2021). Occupancy was reported at 67.3% in June 2021 with approximately 20.5% of the portfolio’s net rentable area (NRA) on leases that have expired or will expire in the next 12 months. Net cash flow (NCF) at year-end (YE) 2020 was $9.7 million compared with the Issuer's underwritten NCF of $22.8 million.

The second-largest loan in the pool, the Coastal Grand Mall loan (Prospectus ID#2, 11.8% of the pool), is also on the servicer’s watchlist. The 10-year loan is secured by an enclosed regional mall totaling 1.1 million sf in Myrtle Beach, South Carolina, that is considered to be the dominant mall in its market. The loan was added to the servicer’s watchlist in July 2020 as a result of a coronavirus relief request. After requesting coronavirus-related relief, a modification was completed where principal was deferred from July 2020 to December 2020 with repayment of the deferred amounts occurring over the ensuing 12 months.

Occupancy was 84% in September 2021, down from 86% in June 2021, 92% at YE2020, and 97% at issuance. As of a recent rent roll, 48 tenants (13.5% of NRA) have lease expirations within the next 12 months. Top tenants include the ground-leased anchor, JCPenney (16% of NRA, expiring in March 2028), Cinemark (8% of NRA, expiring in March 2024), and Bed Bath & Beyond (4% of NRA, expiring in January 2030). Non-collateral anchor tenant Sears closed in January 2021 and its space remains dark at the mall. Additionally, Dick’s Sporting Goods (8% of NRA) vacated upon its January 2020 lease expiry and the space has yet to be back-filled. At YE2020, NCF was $12.6 million, 18% below the Issuer's underwritten NCF. The DSCR in YE2020 was 2.13 times (x), in line with the issuance DSCR of 2.11x.

The largest loan in special servicing is the Beverly Connection loan (Prospectus ID#3, 9.5% of the pool), an $87.5 million pari passu participation of a whole loan totaling $175 million. In addition to the senior debt, there is also a B Note and mezzanine debt. The IO trust loan is secured by the borrower's fee and leasehold interest in a 334,566-sf big box retail property in Los Angeles. The loan transferred to special servicing in August 2020 for payment default and is 121-plus days delinquent as of November 2021. The servicer and the borrower continue to work toward a forbearance and reinstatement of the loan; however, the borrower is also in discussions with the mezzanine lender on a workout of that loan. As of the November 2021 reporting period, the senior loan has accumulated approximately $10 million of outstanding servicer advances and ASERs, bringing the loan's total exposure to $97 million. The loan also reports $25.8 million in total reserves. An updated appraisal dated October 2020 valued the property at $242.0 million, down 7% from $260.0 million at issuance.

Occupancy declined slightly to 91% in August 2021 from 95% in March 2020, and 98% at issuance. The largest tenant is City Target (29% of NRA, expiring in January 2029). The second-largest tenant, Marshall’s (10.2% of NRA), is in the process of extending its lease through January 2027. The lease for the third-largest tenant, Ross Dress For Less (9% of NRA), expired in January 2021 but the store remains in the property’s directory as of November 2021.

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 and X-C 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.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#1 – Stamford Plaza Portfolio (14.7% of the pool)
-- Prospectus ID#2 – Coastal Grand Mall (11.8% of the pool)
-- Prospectus ID#3 – Beverly Connection (9.5% of the pool)

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 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.

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 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@dbrsmorningstar.com.

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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

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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