DBRS Morningstar Confirms Credit Ratings on All Classes of GS Mortgage Securities Trust, 2010-C1

DBRS Limited (DBRS Morningstar) confirmed its credit ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2010-C1 issued by GS Mortgage Securities Trust, 2010-C1 as follows:

-- Class B at AAA (sf)
-- Class C at A (high) (sf)
-- Class D at C (sf)

The trends on Classes B and C are Stable. Class D is assigned a credit rating that does not typically carry a trend in commercial mortgage-backed securities (CMBS) credit ratings.

The credit rating confirmations reflect the stable performance outlook and recoverability expectations for the two remaining loans in the transaction, Mall at Johnson City (Prospectus ID#6, 53.9% of current pool balance) and Grand Central Mall (Prospectus ID#7, 46.1% of the current pool balance). As the pool continues to wind down, DBRS Morningstar looked to a recovery analysis for the loans. Both properties were reappraised in 2019 and 2020, with values that were below issuance figures but still above the outstanding loan amounts. Even with a haircut to the most recent values, the recoverability analysis suggested the two most senior rated certificates in the pool are generally well protected against loss considering the $37.7 million of cushion below Class C, therefore supporting the credit rating confirmations and Stable trends.

The sponsor for both loans is Washington Prime Group Inc. (WPG), a real estate investment trust that invests primarily in retail properties. WPG had filed for Chapter 11 bankruptcy protection in June 2021 but emerged in October 2021 upon reorganizing its business. Both of the subject properties were considered core assets at the time of the bankruptcy filing, suggesting a longer-term commitment as compared with those categorized in lower tiers.

Mall at Johnson City is a regional mall in Johnson City, Tennessee, located approximately 120 miles from Knoxville. The loan was modified in December 2019 to extend the maturity to May 2023, with two one-year extension options available, and the first option was exercised and extended the maturity to May 2024. In order to exercise an extension, the borrower was required to pass a debt yield test of 11.5% based on the net operating income (NOI) and pay a fee to the special servicer. As of the most recent financial reporting, the loan would meet the required threshold needed to satisfy the second extension option, with a YE2022 and trailing nine months (T-9) ending September 2023 annualized NOI debt yield of 16.7% and 15.5%, respectively. Other terms of the modification required the borrower to make a $5.0 million principal curtailment that was due in May 2020, deposit an additional $10.0 million into various reserves, and remain in cash management.

According to the September 2023 rent roll, the occupancy rate at the property was 97.4%, marginally higher than the prior year’s figure of 96.7%. Anchor tenants include JCPenney, Belk Home Store, Belk for Her, and Dick’s Sporting Goods. Tenant rollover risk within the next 12 months is minimal at 6.2% of the net rentable area (NRA). Forever 21 (4.3% of NRA) had a lease expiration in January 2023 but continues to be open for business, suggesting the tenant is likely on a month-to-month lease; however, the rent roll indicates that the tenant does not pay any base rent at the property. Tenant sales of $242.65 per square foot (psf) for the trailing 12-month (T-12) period ending August 31, 2023, were higher than the previously reported figure of $192.59 for the T-12 period ending August 31, 2022. Annualized net cash flow (NCF) for the T-9 period ending September 30, 2023, was reported to be $5.9 million (a debt service coverage ratio (DSCR) of 1.78 times (x)), lower than the YE2022 figure of $6.4 million (a DSCR of 1.93x), but relatively in line with the YE2021 figure of $5.8 million (a DSCR of 1.75x). The subject was last appraised in September 2019 at a value of $52.0 million; although a decline from the issuance value of $88.5 million, it still covers the outstanding loan balance of $40.7 million.

Grand Central Mall is a regional mall in Vienna, West Virginia, which is located along the Ohio-West Virginia border. The loan was modified to extend the maturity to July 2023, with two additional one-year extension options, pursuant to the loan meeting an 11.0% NOI debt yield. The borrower has exercised its first one-year extension option, pushing the current maturity date to July 2024. As of the most recent financial reporting, the loan would meet the required threshold to satisfy the second extension option, with a YE2022 and T-9 period ending September 30, 2023, annualized NOI debt yield of 22.8% and 22.5%, respectively. Per the September 2023 rent roll, the property was 98.1% occupied. The three largest tenants are JC Penney, Belk, and Dunham’s Sporting Goods. Scheduled lease rollover within the next 12 months is minimal, with leases representing 3.6% of NRA set to roll. Tenant sales of $187.91 psf are below the prior year’s figure of $209.84 psf; however, NCF for the T-9 period ending September 30, 2023, was reported to be $6.7 million (DSCR of 2.06x), in line with the YE2022 figure of $6.8 million (a DSCR of 2.09x), and higher than the issuance figure of $6.3 million (DSCR of 1.95x). The property was last appraised in May 2020 at a value of $45.0 million, a decline from the issuance value of $83.5 million but still above the outstanding loan amount of $34.8 million.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors 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/416784 (July 4, 2023).

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

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

The principal methodology is the North American CMBS Surveillance Methodology (March 16, 2023;
https://www.dbrsmorningstar.com/research/410912).

Other methodologies referenced in this transaction are listed at the end of this press release.

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 credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

DBRS Morningstar notes that a sensitivity analysis was not performed for this review as the transaction is in wind down, with only two remaining loans. In those cases, the DBRS Morningstar ratings are typically based on a recoverability analysis for the remaining loans.

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The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

-- North American CMBS Multi-Borrower Rating Methodology (November 3, 2023)/North American CMBS Insight Model v 1.2.0.0 (https://www.dbrsmorningstar.com/research/422859)

-- Rating North American CMBS Interest-Only Certificates (December 13, 2023; https://www.dbrsmorningstar.com/research/425261)

-- DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 22, 2023; https://www.dbrsmorningstar.com/research/420982)

-- North American Commercial Mortgage Servicer Rankings (August 23, 2023; https://www.dbrsmorningstar.com/research/419592)

-- Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023; https://www.dbrsmorningstar.com/research/415687)

-- Legal Criteria for U.S. Structured Finance (December 7, 2023;
https://www.dbrsmorningstar.com/research/425081)

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/417279.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.