DBRS Morningstar Downgrades Rating on One Class and Discontinues One Class of GS Mortgage Securities Trust 2015-GC28

DBRS, Inc. (DBRS Morningstar) downgraded its rating on one class of Commercial Mortgage Pass-Through Certificates, Series 2015-GC28 issued by GS Mortgage Securities Trust 2015-GC28 as follows:

-- Class F to CCC (sf) from B (low) (sf)

In addition, DBRS Morningstar confirmed its ratings on the remaining classes 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 (high) (sf)
-- Class B at AA (sf)
-- Class C at A (low) (sf)
-- Class PEZ at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class X-C at BB (sf)
-- Class E at BB (low) (sf)

DBRS Morningstar maintains Negative trends on Classes E, F, and X-C, while all other trends are Stable. DBRS Morningstar discontinued its rating on Class X-D as its reference class is rated CCC (sf).

As of the January 2022 remittance, 62 of the original 74 loans remain in the pool, with an aggregate principal balance of $700.9 million, representing a collateral reduction of 23.3% since issuance. Sixteen loans, representing 14.5% of the current trust balance, are defeased. There are five loans, representing 5.0% of the current trust balance, in special servicing and 11 loans, representing 15.8% of the pool, are being monitored on the servicer’s watchlist.

The downgrade and Negative trends reflect the overall weakened performance of the collateral since DBRS Morningstar’s last review and the increased likelihood of losses to the trust upon the resolution of several of the specially serviced loans, including the pool’s largest special-serviced loan, the Iron Horse Hotel (Prospectus ID#11, 2.4% of the pool). The loan, which is backed by a 100-key, full-service boutique hotel in Milwaukee, transferred to special servicing in March 2020 as a result of imminent default for issues arising prior to the onset of the Coronavirus Disease (COVID-19) pandemic. The loan experienced a decrease in room and food and beverage revenue as a result of new competition within the market and 2019 net cash flow (NCF) was less than half of the issuance figure. As of September 2021, the hotel was outperforming its competitive set with a trailing three months (T-3) revenue per available room (RevPAR) penetration rate of 118.1%. The special servicer continues to dual-track the borrower’s latest proposal with litigation. An updated appraisal completed in June 2021 valued the property at $22.4 million, a 23.3% decrease from the issuance value of $29.2 million. While the value of the appraisal was in excess of the loan amount, the loan includes servicing advances totaling $2.9 million, which could result in a realized loss under a liquidation scenario. DBRS Morningstar liquidated this loan as part of this analysis and assumed a loss to the trust.

The largest watchlisted loan, the Paramount Hotel (Prospectus ID#6, 3.3% of the pool), is secured by a 146-room, full-service boutique hotel in Seattle. The loan was added to the servicer’s watchlist in November 2020 because of a decrease in occupancy as a result of the pandemic. The loan reported negative cash flow at year-end (YE) 2020, although the T-12 as of September 2021 reported positive cash flow, albeit below break-even. Prior to the pandemic, the loan was performing above issuance expectations and the early signs of recovery are promising.

The second-largest watchlisted loan, McDade Retail (Prospectus ID#7, 2.8% of the pool), is secured by a 262,000-sf shopping center in Holmes, Pennsylvania. The loan was returned to the master servicer in March 2021 as a corrected mortgage after transferring to special servicing in June 2020 for imminent default after anchor tenant Kmart (40.3% of NRA) vacated. As of June 2021, the occupancy rate is 50.5%, decreasing from 98.8% at YE2019. The submarket vacancy is low, which will aid in back-filling Kmart’s former space, and anchor tenant Acme (17.6% of NRA) extended its lease through August 2025.

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#6 – Paramount Hotel (3.3% of the pool)
-- Prospectus ID#7 – McDade Retail (2.8% of the pool)
-- Prospectus ID#11 – Iron Horse Hotel (2.4% 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 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.

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.

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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