DBRS Morningstar Confirms Ratings on Citigroup Commercial Mortgage Trust 2015-GC33

DBRS Limited (DBRS Morningstar) confirmed the ratings of the Commercial Mortgage Pass-Through Certificates, Series 2015-GC33 issued by Citigroup Commercial Mortgage Trust 2015-GC33 as follows:

-- 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 C at A (low) (sf)
-- Class PEZ at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class X-D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (sf)
-- Class G at B (low) (sf)

With this review, DBRS Morningstar changed the trends on Classes D, E, F, G, and X-D to Stable from Negative. All other trends are Stable. The trend changes reflect the improving performance for underlying collateral that was previously negatively affected by the Coronavirus Disease (COVID-19) pandemic and also DBRS Morningstar’s improved outlook for Hammons Hotel Portfolio (Prospectus ID#2, 10.6% of the current pool). That loan, previously the largest in special servicing, has been performing according to the terms of its 2021 modification and continues to exhibit stabilizing revenue trends.

The trust consists of 61 of the original 64 loans with an aggregate principal balance of $872.2 million, reflecting a collateral reduction of 9.0% since issuance. As of September 2022, there are 24 loans, representing 45.8% of the pool, on the servicer’s watchlist. Two loans, representing 1.1% of the pool, are delinquent and in special servicing. Six loans, representing 9.9% of the current pool, are fully defeased.

The largest watchlisted loan, Illinois Center (Prospectus ID#1, 11.1% of the current pool balance), is secured by two Class A office towers in downtown Chicago. The loan was added to the servicer’s watchlist in September 2021 for performance declines resulting from the coronavirus pandemic. As of June 2022, the property was 62.9% occupied, down from 73.8% at YE2019. The occupancy declines are a result of several tenants, including McGann, Ketterman & Rioux; Bankers Life and Casualty Company; and iHeartMedia Inc., vacating or downsizing because of the impacts of the coronavirus pandemic. However, the servicer commentary reports three new tenants have signed leases at the property since the beginning of 2022. Tenancy is rather granular as according to the March 2022 rent roll; the three largest tenants at the property represent less than 10% of the net rentable area (NRA) and include the U.S. General Services Administration – Department of Health and Human Services (8.4% of NRA), Bankers Life and Casualty Company (6.4% of NRA), and iHeartMedia Inc. (5.1% of NRA). There is significant near-term rollover risk with 22.0% of NRA scheduled to expire by YE2023, including the first- and second-largest tenants, with scheduled lease expirations in November 2023 and August 2023, respectively. According to Reis, the East Loop submarket reported an average vacancy rate of 14.1%, compared with the subject’s in-place vacancy of 37.1%. The property is achieving an average rental rate of $27 per square foot (psf), in line with the submarket average of $25 psf. Despite the increased vacancy, the loan remains current, and the borrower has access to $7.5 million in tenant reserves. The loan is sponsored by Michael Karfunkel, a principal of AmTrust Realty Corporation, which contributed $139.9 million of equity at issuance.

The largest specially serviced loan, Houston Hotel Portfolio (Prospectus ID#15, 0.8% of the current pool), was secured at issuance by two limited-service hotels in Houston: Holiday Inn Express & Suites and Hampton Inn Port Arthur. The loan transferred to special servicing in July 2020, and the asset has been real estate owned since August 2021. The Hampton Inn Port Arthur property sold for $7.5 million in May 2022, and proceeds were used to partially repay the loan balance. The May 2022 appraisal revalued the remaining Holiday Inn Express West Road property at $4.0 million, significantly below $13.3 million at issuance. According to the most recent STR, Inc. report, dated March 2021, Holiday Inn Express West Road reported trailing 12-month (T-12) occupancy, average daily rate, and revenue per available room (RevPAR) figures of 26.0%, $79, and $21, respectively. The T-12 RevPAR penetration rate of 74.8% indicates that the subject is performing well below its competitive set. The loan reported negative cash flow at YE2021 and has experienced occupancy declines since issuance. The servicer commentary states the property went to auction in July 2022 and is currently in escrow; however, the sale has not yet closed. DBRS Morningstar anticipates the loss severity will be in excess of 65.0% for this loan at final resolution.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022).

Classes X-A and X-D 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 this transaction.

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.

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

The principal methodology is North American CMBS Surveillance Methodology (October 3, 2022), 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.

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.

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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