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Rating Action:

Moody's Affirms Nine CMBS Classes of GSMS 2010-C2

Global Credit Research - 29 Aug 2013

Approximately $824 Million of Structured Securities Affected

New York, August 29, 2013 -- Moody's Investors Service (Moody's) affirmed the ratings of nine classes of Goldman Sachs Mortgage Securities trust 2010-C2 as follows:

Cl. A-1, Affirmed Aaa (sf); previously on Dec 30, 2010 Definitive Rating Assigned Aaa (sf)

Cl. A-2, Affirmed Aaa (sf); previously on Dec 30, 2010 Definitive Rating Assigned Aaa (sf)

Cl. B, Affirmed Aa2 (sf); previously on Dec 30, 2010 Definitive Rating Assigned Aa2 (sf)

Cl. C, Affirmed A2 (sf); previously on Dec 30, 2010 Definitive Rating Assigned A2 (sf)

Cl. D, Affirmed Baa3 (sf); previously on Dec 30, 2010 Definitive Rating Assigned Baa3 (sf)

Cl. E, Affirmed Ba2 (sf); previously on Dec 30, 2010 Definitive Rating Assigned Ba2 (sf)

Cl. F, Affirmed B2 (sf); previously on Dec 30, 2010 Definitive Rating Assigned B2 (sf)

Cl. X-A, Affirmed Aaa (sf); previously on Dec 30, 2010 Definitive Rating Assigned Aaa (sf)

Cl. X-B, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf)

RATINGS RATIONALE

The affirmations of the P&I classes are due to key parameters, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. The rating of the IO Classes, Class X-A and X-B, are consistent with the expected credit performance of their referenced classes and thus are affirmed.

Based on our current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings.

Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for rated classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes.

Moody's rating action reflects a base expected loss of approximately 2.0% of the current deal balance. At last review, Moody's base expected loss was approximately 2.1%. Moody's base expected loss plus realized loss is 1.9% of the original, securitized deal balance, compared to 2.1% at Moody's last review. Moody's provides a current list of base losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.

The principal methodology used in this rating was "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Moody's review incorporated the use of the Excel-based CMBS Conduit Model v 2.62 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 (sf) level are driven by a pay down analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in our analysis. Based on the model pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade underlying ratings is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the underlying rating level, is incorporated for loans with similar credit assessments in the same transaction.

Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 24, the same as at last review.

Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output.

The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through a review utilizing MOST® (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated October 25, 2012. Please see the ratings tab on the issuer / entity page on moodys.com for the last rating action and the ratings history.

DEAL PERFORMANCE

As of the August 6, 2013 determination date, the transaction's aggregate certificate balance has decreased by 3% to $852 million from $876 million at securitization. The Certificates are collateralized by 43 mortgage loans ranging in size from less than 1% to 10% of the pool, with the top ten loans representing 52% of the pool. The pool contains five loans with investment grade credit assessments, representing 14% of the pool.

Currently one loan, representing 1% of the pool, is on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of our ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance.

The pool has not experienced any losses and currently there are no loans in special servicing.

Moody's was provided with full year 2012 and partial year 2013 operating results for 100% and 83% of the pool's loans. Moody's weighted average conduit LTV is 87% compared to 92% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 14.8% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.6%.

Moody's actual and stressed conduit DSCRs are 1.65X and 1.24X, respectively, compared to 1.57X and 1.17X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance.

The largest loan with a credit assessment is the Cole Portfolio I Loan ($31.5 million -- 3.7% of the pool balance), which is secured by a fee interest in 20 single tenant properties located across 13 states. The portfolio consists of 17 retail properties, two industrial properties and one ground leased parcel that is improved with a retail building. In aggregate, the portfolio contains approximately 555,095 square feet (SF) and was 100% leased as of March 2013. Only one lease, representing 9% of the net rentable area (NRA) expires during the loan term. Moody's credit assessment and stressed DSCR are Baa3 and 1.52X, respectively, the same as last review.

The second largest loan with a credit assessment is the Cole Portfolio II Loan ($30.0 million -- 3.5%), which is secured by a fee interest in 14 single tenant properties and one multi-tenant industrial property located across 11 states. In aggregate, the portfolio contains approximately 331,521 SF and was 100% leased as of March 2013. Moody's credit assessment and stressed DSCR are Baa3 and 1.55X, compared to Baa3 and 1.51X at last review.

The third largest loan with a credit assessment is the Payless and Brown Industrial Portfolio Loan ($28.2 million -- 3.3%), which is secured by two single tenant industrial properties. The Payless Distribution Center represents the larger of the two properties and totals approximately 801,651 SF of the Northbrook Industrial Park in Brookville, Ohio. The property was built in 2008 and has 32' ceiling heights, three grade drive-in doors 76 dock high doors, and approximately 24,853 SF of office space. The remainder of the collateral is represented by the Brown Shoe Distribution Center, a 351,723 SF warehouse/distribution building located in Lebec, California within the Tenjon Industrial Complex. The property was built in 2008 and has 32' ceiling heights, a single grade drive-in door, 38 exterior docks with levelers, and approximately 11,869 SF of office space. Moody's credit assessment and stressed DSCR are Baa2 and 1.78X, compared to Baa2 and 1.72 at last review.

The fourth largest loan with a credit assessment is the ARC Credit Portfolio 2 Loan ($19.6 million -- 2.3%), which is secured by 10 single tenant retail properties located across five states. In aggregate, the portfolio contains approximately 116,107 SF that was 100% leased as of December 2012. All of the properties are occupied by investment grade tenants. Moody's credit assessment and stressed DSCR are A3 and 1.61X, respectively, the same as last review.

The fifth largest loan with a credit assessment is the Ruxton Towers Loan ($11.9 million -- 1.4%), which is secured by a 16-story apartment building containing 208 units and built in 1927. The property is located in the Upper West Side of Manhattan, NY. The property was 99% leased as of June 2013, the same as last review. Moody's credit assessment and stressed DSCR are Aa3 and 1.74X, respectively, compared to Aa3 and 1.68X at last review.

The top three conduit loans represent 25% of the pool. The largest conduit loan is the 52 Broadway Loan ($88.0 million -- 10.3%), which is secured by a 19-story, 399,935 SF, Class B office building located in downtown Manhattan, New York. The property was constructed in 1982 and renovated in 2002 at a cost of $4.5 million ($11.25 PSF). The United Federation of Teachers has occupied the entire building since the 2002 renovation. They are currently operating under a long term net lease expiring in August 2034. Moody's LTV and stressed DSCR are 110% and 0.92X, respectively, the same as last review.

The second largest conduit loan is the Cleveland Office Portfolio Loan ($62.8 million -- 7.4%), which is secured by two separate office properties located at the intersection of East 9th Street and St Clair Avenue NE in downtown Cleveland, Ohio. One Cleveland Center is a 34-story, Class A high-rise office building containing approximately 543,728 SF. The building was constructed in 1983 and renovated in 2009. The Penton Media Building is a 20-story, Class A high-rise office building containing approximately 600,291 SF. The building was constructed in 1974 and has never undergone a major renovation. Both properties offer attached parking garages and ground floor retail. In total, the portfolio was 77% leased as of March 2013 compared to 74% at last review. Moody's LTV and stressed DSCR are 91% and 1.15X, respectively, the same as last review.

The third largest conduit loan is the Station Square Loan ($59.8 million -- 7.0%), which is secured by a 669,982 SF mixed use property located in Pittsburgh, Pennsylvania. The property is comprised of five buildings containing 449,384 SF of office space and 220,308 SF of retail space, two open-air parking lots offering approximately 2,500 spaces, a covered parking garage offering 1,210 spaces, docks leased to the Gateway Clipper Fleet, marina slips, an outdoor amphitheater leased to a third party operator, and land under a gas stations owned by a third party operator. The age of the improvements vary, with the oldest structure built in 1897 and the newest structure built in 2001. Moody's LTV and stressed DSCR are 94% and 1.09X, respectively, compared to 93% and 1.11X at last review

REGULATORY DISCLOSURES

Moody's did not receive or take into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments related to the monitoring of this transaction in the past six months.

In conducting surveillance of this credit, Moody's considered performance data contained in servicer and remittance reports. Moody's obtains servicer reports on this transaction on a periodic basis, at least annually.

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 rating action on the support provider and in relation to each particular 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 rating action, and whose ratings may change as a result of this 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.

Jeffrey Gilbane
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Michael Gerdes
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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

Moody's Affirms Nine CMBS Classes of GSMS 2010-C2
No Related Data.

 

© 2014 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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