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Rating Action:

Moody's Affirms Eight and Downgrades Two CMBS Classes of GSMS 2012-GCJ7

Global Credit Research - 26 Jul 2017

Approximately $1.181 Billion of Structured Securities Affected

New York, July 26, 2017 -- Moody's Investors Service has affirmed the ratings on eight classes and downgraded the ratings on two classes in GS Mortgage Securities Trust 2012-GCJ7, Commercial Mortgage Pass-Through Certificates, Series 2012-GCJ7 as follows:

Cl. A-4, Affirmed Aaa (sf); previously on Jan 27, 2017 Affirmed Aaa (sf)

Cl. A-AB, Affirmed Aaa (sf); previously on Jan 27, 2017 Affirmed Aaa (sf)

Cl. A-S, Affirmed Aaa (sf); previously on Jan 27, 2017 Affirmed Aaa (sf)

Cl. B, Affirmed Aa3 (sf); previously on Jan 27, 2017 Affirmed Aa3 (sf)

Cl. C, Affirmed A3 (sf); previously on Jan 27, 2017 Affirmed A3 (sf)

Cl. D, Affirmed Baa3 (sf); previously on Jan 27, 2017 Affirmed Baa3 (sf)

Cl. E, Downgraded to Ba3 (sf); previously on Jan 27, 2017 Affirmed Ba2 (sf)

Cl. F, Downgraded to Caa1 (sf); previously on Jan 27, 2017 Affirmed B2 (sf)

Cl. X-A, Affirmed Aaa (sf); previously on Jan 27, 2017 Affirmed Aaa (sf)

Cl. X-B, Affirmed B1 (sf); previously on Jun 9, 2017 Downgraded to B1 (sf)

RATINGS RATIONALE

The ratings on the P&I classes A-4 through D were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges.

The ratings on the IO classes X-A and X-B were affirmed based on the credit quality of the referenced classes.

The ratings on the P&I classes E and F were downgraded due to realized and anticipated losses from specially serviced and troubled loans that were higher than Moody's had previously expected.

Moody's rating action reflects a base expected loss of 4.9% of the current balance, compared to 4.1% at Moody's last review. Moody's base expected loss plus realized losses is now 4.2% of the original pooled balance, compared to 3.5% at the last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected.

Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance.

Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls.

METHODOLOGY UNDERLYING THE RATING ACTION

The principal methodology used in these ratings was "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in December 2014. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Additionally, the methodology used in rating Cl. X-A and Cl. X-B was "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in June 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

DEAL PERFORMANCE

As of the July 10, 2017 distribution date, the transaction's aggregate certificate balance has decreased by 25% to $1.221 billion from $1.623 billion at securitization. The certificates are collateralized by 65 mortgage loans ranging in size from less than 1% to 10% of the pool, with the top ten loans (excluding defeasance) constituting 53% of the pool. Six loans, constituting 8% of the pool, have defeased and are secured by US government securities.

Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 23, compared to 26 at Moody's last review.

Twelve loans, constituting 18% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance.

One loan has been liquidated from the pool, resulting in a realized loss of $8.4 million (for a loss severity of 36%). Two loans, constituting 4% of the pool, are currently in special servicing. The largest specially serviced loan is the 545 Long Warf Drive Loan ($28.6 million -- 2.3% of the pool), which is secured by a 9-story, Class A office building located in New Haven, Connecticut, overlooking the New Haven Harbor and Long Island Sound. The loan transferred to special servicing in May 2017 due to imminent monetary default. The property's largest tenant, AT&T (71% of the net rental area), vacated at lease-end in April 2017, and this space is currently being advertised for lease.

The second largest specially serviced loan is the Fifth Third Center Loan ($16.1 million -- 1.3% of the pool), which is secured by an office tower located in the Central Business District (CBD) of Dayton, Ohio. The loan transferred to special servicing in April 2017 due to maturity default. As of June 2017, the property was 56% occupied, compared to 62% in December 2016, and 80% at securitization.

Moody's estimates an aggregate $22 million loss for specially serviced loans (48% expected loss on average).

Moody's has assumed a high default probability for six poorly performing loans, constituting 7% of the pool, and has estimated an aggregate loss of $16 million (a 20% expected loss based on a 50% probability default) from these troubled loans.

Moody's received full year 2016 operating results for 93% of the pool, and partial year 2017 operating results for 77% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 85%, compared to 88% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 16% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.7%.

Moody's actual and stressed conduit DSCRs are 1.60X and 1.31X, respectively, compared to 1.54X and 1.26X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance.

The top three conduit loans represent 24% of the pool balance. The largest loan is the 1155 F Street Loan ($123.0 million -- 10.1% of the pool), which is secured by a Class A, trophy office and retail building located in Washington, D.C. The collateral is also encumbered by $19.9 million of mezzanine debt. As of March 2017, the property was 97% leased, compared to 96% in September 2016. The property's largest tenants include three law firms that make up 63% of the net rentable area (NRA). Moody's LTV and stressed DSCR are 94% and 1.03X, respectively compared to 95% and 1.02X at the last review.

The second largest loan is the Columbia Business Center Loan ($86.9 million -- 7.1% of the pool), which is secured by the fee and leasehold interests in an industrial park consisting of 26 buildings, totaling 4.66 million square feet (SF), located along the Columbia River in Vancouver, Washington. Approximately 9% of the NRA is allocated to office use with the remainder used for warehouse and manufacturing purposes. The property was 99% leased as of March 2017, compared to 97% in September 2016. Moody's LTV and stressed DSCR are 92% and 1.36X, respectively, compared to 94% and 1.34X at the last review.

The third largest loan is the Bellis Fair Mall Loan ($85.7 million -- 7.0% of the pool), which is secured by a 538,226 SF component of a 776,136 SF single-story, enclosed regional mall located in Bellingham, Washington. The property is approximately 90 miles north of Seattle and 20 miles south of the border with Canada. The mall is anchored by Macy's, Target, Kohl's, J.C. Penney, and Dick's Sporting Goods, with only Macy's and Dick's Sporting Goods being part of the loan collateral. The property is the dominant mall within its trade area and the only enclosed regional mall within the Bellingham and Northwest Washington markets. The closest regional mall competition is 28 miles south of the subject. As of March 2017, the inline space was 66% leased, compared to 67% in December 2016, and 92% in December 2015. Inline sales per square foot (PSF) were $253 for the March 2017 trailing-twelve-month period. Moody's LTV and stressed DSCR are 117% and 0.97X, respectively.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.

Moody's did not use any stress scenario simulations in its analysis.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Leah Zulkoski
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

EunJee EJ Park
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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