Fitch Assigns Final Ratings to GS Mortgage Securities Trust 2015-GC34 Commercial Mortgage P-T Certs
--\\$30,283,000 class A-1 'AAAsf'; Outlook Stable;
--\\$28,822,000 class A-2 'AAAsf'; Outlook Stable;
--\\$185,000,000 class A-3 'AAAsf'; Outlook Stable;
--\\$284,382,000 class A-4 'AAAsf'; Outlook Stable;
--\\$65,382,000 class A-AB 'AAAsf'; Outlook Stable;
--\\$634,167,000b class X-A 'AAAsf'; Outlook Stable;
--\\$48,782,000b class X-B 'AA-sf'; Outlook Stable;
--\\$40,298,000c class A-S 'AAAsf'; Outlook Stable;
--\\$48,782,000c class B 'AA-sf'; Outlook Stable;
--\\$131,499,000c class PEZ 'A-sf'; Outlook Stable;
--\\$42,419,000c class C 'A-sf'; Outlook Stable;
--\\$51,964,000 class D 'BBB-sf'; Outlook Stable;
--\\$51,964,000b class X-D 'BBB-sf'; Outlook Stable;
--\\$23,331,000a class E 'BB-sf'; Outlook Stable;
--\\$8,483,000a class F 'B-sf'; Outlook Stable.
(a) Privately placed and pursuant to Rule 144A.
(b) Notional amount and interest-only.
(c) Class A-S, B and C certificates may be exchanged for class PEZ certificates, and class PEZ certificates may be exchanged for class A-S, B, and C certificates.
Fitch does not rate the \\$39,238,739 class G.
The classes above reflect the final ratings and deal structure. The certificates represent the beneficial ownership interest in the trust, primary assets of which are 57 loans secured by 75 commercial properties having an aggregate principal balance of approximately \\$848.4 million as of the cut-off date. The loans were contributed to the trust by Citigroup Global Markets Realty Corp., Goldman Sachs Mortgage Company, MC-Five Mile Commercial Mortgage Finance LLC, Starwood Mortgage Funding I LLC, and Cantor Commercial Real Estate Lending, L.P.
Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 75.9% of the properties by balance, cash flow analysis of 80.9%, and asset summary reviews on 100% of the pool.
KEY RATING DRIVERS
High Fitch Leverage: The transaction has higher leverage than other recent Fitch-rated transactions. The pool's Fitch debt service coverage ratio (DSCR) of 1.09x is below both the year to date 2015 average of 1.20x and the 2014 average of 1.19x. The pool's Fitch loan to value (LTV) of 112.3% is above both the year to date 2015 average of 109.1% and the 2014 average of 106.2%.
Above-Average Pool Concentration: The largest 10 loans account for 55.3% of the pool by balance. This is greater than the year to date 2015 average of 48.5% and the 2014 average of 50.5%. The pool's above-average concentration resulted in a loan concentration index (LCI) of 467, which is greater than the year to date 2015 and 2014 averages of 352 and 387, respectively.
High Quality Collateral: Fitch performed site inspections for properties that secured loans representing 75.9% of the total pool balance. Of the properties that Fitch inspected, 39.2% of received a property quality grade of 'B+' or better. Three properties (750 Lexington Avenue, Parkside at So7 and LA Fitness Powell) comprising 23.3% of the inspected pool were assigned a property quality grade of 'A-'. Only 10.6% of the inspected pool was assigned property quality grades of 'B-' or 'C+', indicating below average property quality.
Minimal Additional Debt: One loan (1.4% of the pool) has nonpooled subordinate debt held outside the trust. Furthermore, Hammons Hotel Portfolio (8.5% of the pool) has a partial pledge of equity on a line of credit. The Fitch stressed DSCR and LTV for the pool on the total debt are 1.07x and 113.5%, respectively.
Below-Average Amortization: The pool is scheduled to amortize by 11.9% of the initial pool balance prior to maturity. This is slightly below the averages of year to date 2015 and 2014 of 12.3% and 12%, respectively. Three loans (8.5%) are full-term interest only and 30 loans (62.5%) are partial interest only, with the remaining 24 loans (29%) being balloon loans.
Pari Passu Loans: Five loans in the pool (34.1%) are part of a split-loan, pari passu structure. The 750 Lexington Avenue (9.96% of the pool) and DoubleTree Hotel (2.2% of the pool) loan combinations will be serviced under the pooling and servicing agreement for this transaction. The controlling note for Illinois Center (11.8% of the pool) and Hammons Hotel Portfolio (8.5% of the pool) was contributed to the CGCMT 2015-GC33 transaction. The controlling note for the Hyatt Place Texas Portfolio (1.6% of the pool) is expected to be contributed to the JPMBB 2015-C32 transaction.
Loan Mortgage Coupons: The pool's weighted average coupon is 4.68%, which is well below historical averages. Fitch accounted for increased refinance risk in a higher interest rate environment by reviewing an interest rate sensitivity that assumes an interest rate floor of 5% for the term risk for most property types, 4.5% for multifamily properties, and 6% for hotel properties, in conjunction with Fitch's stressed refinance rate, which was 10.11% on a weighted-average basis.
For this transaction, Fitch's net cash flow (NCF) was 11.5% below the most recent year's net operating income (NOI; for properties for which a full year NOI was provided, excluding properties that were stabilizing during this period). The following rating sensitivities describe how the ratings would react to further NCF declines below Fitch's NCF. The implied rating sensitivities are only indicative of some of the potential outcomes and do not consider other risk factors to which the transaction is exposed. Stressing additional risk factors may result in different outcomes. Furthermore, the implied ratings, after the further NCF stresses are applied, are more akin to what the ratings would be at deal issuance had those further stressed NCFs been in place at that time.
Fitch evaluated the sensitivity of the ratings assigned to GSMS 2015-GC34 certificates and found that the transaction displays average sensitivity to further declines in NCF. In a scenario in which NCF declined a further 20% from Fitch's NCF, a downgrade of the senior 'AAAsf' certificates to 'BBB+sf' could result. In a more severe scenario, in which NCF declined a further 30% from Fitch's NCF, a downgrade of the senior 'AAAsf' certificates to 'BBB-sf' could result. The presale report includes a detailed explanation of additional stresses and sensitivities on pages 10 - 11.
DUE DILIGENCE USAGE
Fitch was provided with third-party due diligence information from Ernst & Young LLP. The third-party due diligence information was provided on Form ABS Due Diligence-15E and focused on a comparison and re-computation of certain characteristics with respect to each of the 57 mortgage loans. Fitch considered this information in its analysis and the findings did not have an impact on our analysis. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained on the bottom of the related rating action commentary.