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Rating Action:

Moody's affirms one and downgrades four classes of GSMS 2011-GC3

07 Apr 2021

Approximately $196 million of structured securities affected

New York, April 07, 2021 -- Moody's Investors Service, ("Moody's") has affirmed the rating on one class and downgraded the ratings on four classes in GS Mortgage Securities Trust 2011-GC3, Commercial Mortgage Pass-Through Certificates, Series 2011-GC3 as follows:

Cl. C, Affirmed Aa2 (sf); previously on Nov 23, 2020 Affirmed Aa2 (sf)

Cl. D, Downgraded to Baa1 (sf); previously on Nov 23, 2020 Affirmed A3 (sf)

Cl. E, Downgraded to Ba2 (sf); previously on Nov 23, 2020 Affirmed Baa3 (sf)

Cl. F, Downgraded to Caa2 (sf); previously on Nov 23, 2020 Downgraded to B3 (sf)

Cl. X*, Downgraded to Caa1 (sf); previously on Nov 23, 2020 Downgraded to B2 (sf)

* Reflects interest-only classes

RATINGS RATIONALE

The rating on one P&I class was affirmed because of its credit support and the transaction's key metrics, including Moody's loan-to-value (LTV) ratio and Moody's stressed debt service coverage ratio (DSCR), are within acceptable ranges.

The ratings on three P&I classes, Cl. D, Cl. E and Cl. F, were downgraded due to the pool's significant share of specially serviced loans secured by regional malls and other non-essential retail properties. Specially serviced loans now represent 100% of the pool balance, and two regional malls make up 59% of the pooled balance. The regional mall exposure includes Cape Cod Mall (43.0%) and Oxford Valley Mall (16.2%), both of which exhibited declines in performance through year-end 2019 and were further negatively impacted by the coronavirus pandemic. Furthermore, both malls are now past their original maturity dates.

The rating on the IO class was downgraded due to a decline in the credit quality of its referenced classes. The IO class references P&I classes, Cl. C through Cl. G (Cl. G is not rated by Moody's).

The coronavirus pandemic has had a significant impact on economic activity. Although global economies have shown a remarkable degree of resilience to date and are returning to growth, the uneven effects on individual businesses, sectors and regions will continue throughout 2021 and will endure as a challenge to the world's economies well beyond the end of the year. While persistent virus fears remain the main risk for a recovery in demand, the economy will recover faster if vaccines and further fiscal and monetary policy responses bring forward a normalization of activity. As a result, there is a heightened degree of uncertainty around our forecasts. Our analysis has considered the effect on the performance of commercial real estate from a gradual and unbalanced recovery in US economic activity. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties.

We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.

Moody's rating action reflects a base expected loss of 21.6% of the current pooled balance, compared to 8.0% at Moody's last review. Moody's base expected loss plus realized losses is now 3.0% of the original pooled balance, compared to 2.0% 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, 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 rating all classes except interest-only classes was "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1190579. The methodologies used in rating interest-only classes were "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1190579 and "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in February 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1111179. Please see the list of ratings at the top of this announcement to identify which classes are interest-only (indicated by the *). Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

Moody's analysis incorporated a loss and recovery approach in rating the P&I classes in this deal since 100% of the pool is in special servicing. In this approach, Moody's determines a probability of default for each specially serviced loan that it expects will generate a loss and estimates a loss given default based on a review of broker's opinions of value (if available), other information from the special servicer, available market data and Moody's internal data. The loss given default for each loan also takes into consideration repayment of servicer advances to date, estimated future advances and closing costs. Translating the probability of default and loss given default into an expected loss estimate, Moody's then applies the aggregate loss from specially serviced loans to the most junior classes and the recovery as a pay down of principal to the most senior classes.

DEAL PERFORMANCE

As of the March 12, 2021 distribution date, the transaction's aggregate certificate balance has decreased by 86% to $195.9 million from $1.4 billion at securitization. The certificates are collateralized by three mortgage loans ranging in size from 16% to 43% of the pool.

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 three, compared to five at Moody's last review.

As of the March 2021 remittance report, loans representing 100% were non-performing and past maturity.

There are currently no loans 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.

No loans have been liquidated from the pool. Three loans, constituting 100% of the pool, are currently in special servicing. All of the specially serviced loans, representing 100% of the pool, have transferred to special servicing since October 2020.

The largest specially serviced loan is the Cape Cod Mall Loan ($84.2 million -- 43.0% of the pool), which is secured by 521,881 square feet (SF) portion of a 722,000 SF Simon sponsored regional mall located in Hyannis, Massachusetts. The mall is anchored by Macy's, Macy's Home, Target and a Regal Cinema. The improvements and land for Macy's and Macy's Home are not part of the collateral. A former anchor Sears (135,000 SF), vacated in 2018, but was partially backfilled by new tenants. As of September 2020, the property was 93% leased compared to 89% in June 2020 and 66% in September 2019. Occupancy has rebounded due to new leases executed with Target (79,615 SF), Dick's Sporting Goods (45,264 SF) and Planet Fitness (20,000 SF). Regal Cinemas had renewed their lease with plans to make major upgrades to their theater seating, movie screens, and stereo systems, however, the theater is now temporarily closed as a result of the coronavirus pandemic. Marshalls also renewed their lease and has agreed to remodel the store at their own expense. The mall was closed from mid-March until mid-June in 2020 as a result of the pandemic. The loan has amortized almost 16% since securitization and is currently paid through its January 2021 payment date. While property performance has been generally stable since securitization, the 2019 NOI declined year over year and was below expectations at securitization. The loan transferred to special servicing in February 2021 due to imminent balloon/maturity default ahead of its scheduled maturity date in March 2021. Negotiations are currently ongoing, and the borrower is seeking a short-term extension.

The second largest specially serviced loan is the Whalers Village Loan ($80.0 million -- 40.8% of the pool), which is secured by a 110,521 SF open-air lifestyle center located on Maui's Ka'anapali Beach in Lahaina, Hawaii. The property was 92% leased as of September 2020 compared to 97% in September 2019 and 94% in September 2018. The loan transferred to special servicing in October 2020 due to imminent balloon/maturity default as the loan had an original maturity date in January 2021. The loan has remained mostly current on its debt service payments throughout 2020 and is last paid through its February 2021 payment date. Through year-end 2019, the property's performance had improved significantly from securitization due to higher rental revenue. The loan is interest only for its entire term and the actual 2019 NOI DSCR was 4.24X. However, the coronavirus pandemic has significantly impacted the property's operations and the borrower reported 30% of rents were collected as of October 2020. The borrower executed a 12 month maturity extension during December 2020, extending the maturity date to January 2022. A recent appraisal values the property at an amount which materially exceeds the loan balance. Due to the loan's historical performance, and a Moody's LTV of 60%, Moody's does not expect a loss on this loan.

The third largest specially serviced loan is the Oxford Valley Mall Loan ($31.7 million -- 16.2% of the pool), which is secured by a super-regional mall and an office building located in Middletown Township, Pennsylvania. The office building is freely releasable under the terms of the loan and Moody's has not attributed any value to the office component of the collateral since securitization. The collateral originally included an adjacent retail center, known as Lincoln Plaza, which was recently sold and released from the collateral in September 2020 in conjunction with a $25.3 million paydown. As of September 2020, the remaining mall collateral space was 60% leased and inline occupancy was 60%, compared to 81% and 69%, respectively, in September 2018. Occupancy declined after the departure of collateral tenant Sears in January 2019 as well as a declining inline occupancy. There is also a vacant non-collateral anchor space, previously occupied by Boscov's. There have been proposals to develop a portion of the land around the mall into two, four-story apartment buildings with over 600 residential units. The loan transferred to special servicing in October 2020 due to imminent balloon/maturity default and the special servicer is negotiating a possible loan extension and forbearance. The loan is paid through its November 2020 payment date and had an original maturity in December 2020. The loan has paid down approximately 55% since securitization as a result of amortization and paydown resulting from the partial release of Lincoln Plaza. However, the Oxford Valley Mall has suffered from declining occupancy and rental revenue. The special servicer and borrower are negotiating terms for a maturity date extension.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

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, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

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

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

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.

Fred Kasimov
Associate Lead 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

Romina Padhi
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.
© 2021 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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