Approximately $207.3 million of structured securities affected
New York, September 01, 2020 -- Moody's Investors Service, ("Moody's") has
affirmed the ratings on three classes, confirmed the rating on one
class, and downgraded the ratings on three classes in GS Mortgage
Securities Corporation II Commercial Mortgages Pass-Through Certificates
Series 2010-C1 ("GSMS 2010-C1") as follows:
Cl. A-2, Affirmed Aaa (sf); previously on Mar
2, 2020 Affirmed Aaa (sf)
Cl. B, Downgraded to Aa1 (sf); previously on May 29,
2020 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. C, Downgraded to Ba1 (sf); previously on May 29,
2020 Downgraded to Baa3 (sf) and Remained On Review for Possible Downgrade
Cl. D, Confirmed at Caa1 (sf); previously on May 29,
2020 Downgraded to Caa1 (sf) and Remained On Review for Possible Downgrade
Cl. E, Affirmed C (sf); previously on May 29,
2020 Downgraded to C (sf)
Cl. F, Affirmed C (sf); previously on May 29,
2020 Downgraded to C (sf)
Cl. X*, Downgraded to Caa1 (sf); previously on May
29, 2020 B3 (sf) Remained On Review for Possible Downgrade
* Reflects interest-only classes
RATINGS RATIONALE
The rating on one P&I class was 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 two P&I classes were downgraded due to the exposure
to three regional mall loans and one retail property in special servicing.
The largest loan in the pool, 660 Madison Avenue, failed to
pay off at loan maturity and has transferred to special servicing.
The rating on one P&I class was confirmed because the rating is consistent
with Moody's expected loss.
The ratings on two P&I classes were affirmed because the ratings are
consistent with Moody's expected loss.
The rating on one IO class was downgraded based on the credit quality
of the referenced classes.
The rapid spread of the coronavirus outbreak, the government measures
put in place to contain it and the deteriorating global economic outlook,
have created a severe and extensive credit shock across sectors,
regions and markets. Our analysis has considered the effect on
the performance of commercial real estate from the collapse in US economic
activity in the second quarter and a gradual recovery in the second half
of the year. However, that outcome depends on whether governments
can reopen their economies while also safeguarding public health and avoiding
a further surge in infections. As a result, the degree of
uncertainty around our forecasts is unusually high. We regard the
coronavirus outbreak as a social risk under our ESG framework, given
the substantial implications for public health and safety. 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.
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 rating all classes except interest-only
classes was "Moody's Approach to Rating Large Loan and Single
Asset/Single Borrower CMBS" published in May 2020 and available
at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1227875.
The methodologies used in rating interest-only classes were "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower CMBS"
published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1227875
and "Moody's Approach to Rating Structured Finance Interest-Only
(IO) Securities" published in February 2019 and available at https://www.moodys.com/research/Moodys-Approach-to-Rating-Structured-Finance-Interest-Only-IO-Securities--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 and troubled 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 to the
most junior class(es) and the recovery as a pay down of principal to the
most senior class(es).
DEAL PERFORMANCE
As of the August 12, 2020 distribution date, the transaction's
aggregate certificate balance has decreased by 71% to $225
million from $788 million at securitization. The certificates
are collateralized by four mortgage loans ranging in size from 17%
to 34% of the pool, which are secured by retail properties.
All four loans are currently in special servicing. The largest
specially serviced loan is the 660 Madison Avenue Retail Loan ($76.3
million -- 34% of the pool), which is secured by a 264,000
square foot (SF) retail property that formerly served as the Barneys New
York flagship store. Barneys filed for Chapter 11 bankruptcy in
August 2019 and was sold to Authentic Brands Group. Authentic Brands
Group closed this location in February 2020. The property benefits
from its superior location on Madison Avenue between East 60th Street
and East 61st Street in Manhattan. The borrower is seeking an 18
month extension of the loan and a pre-negotiation letter was executed
in June 2020. The loan failed to pay off at maturity and is now
30+ days delinquent. The loan has amortized 24% from
securitization.
The second largest specially serviced loan is the Burnsville Center Loan
($63.2 million -- 28.1% of the pool),
which is secured by a portion of a regional mall located in Burnsville,
Minnesota, a suburb located south of Minneapolis and St.
Paul. The non-collateral anchors include Macy's and JC Penney,
and collateral anchor stores include Dick's Sporting Goods and Gordman's.
The property has one currently vacant non-collateral anchor,
a former Sears that closed in 2017. Furthermore, Stage Stores
(Gordman's parent company) filed for bankruptcy in May 2020 and may eventually
liquidate all stores if they cannot find a buyer. The mall's performance
peaked in 2015 and has since declined annually in both occupancy and tenant
sales per square foot (PSF), with a significant drop during 2018
and 2019. According to CBL's 10k filings, the property's
occupancy for tenants under 20,000 SF was 82% leased in December
2019, down from 94% in December 2017 and 96% in December
2016 and mall store sales for tenants under 20,000 SF were $276
PSF in 2019, down from $292 PSF in 2018, $320
PSF in 2017 and $339 PSF in 2016. While Burnsville Center
is the only regional mall within the market south of the Minnesota River,
it also competes with Twin Cities Premium Outlets. As a result
of declining revenue, the 2019 reported net operating income (NOI)
was 37% lower than in 2010. The departure of any additional
anchor stores could trigger co-tenancy provisions and further accelerate
the decline of the property's cash flow. The loan transferred to
special servicing on January 8, 2020 due to imminent maturity default
ahead of its July 2020 remittance date. The borrower requested
a bifurcation, rate relief, and a loan maturity extension,
which were all rejected. The loan was reclassified as working through
the foreclosure process.
The third largest specially serviced loan is the Mall at Johnson City
Loan ($47.4 million -- 21.1% of the pool),
which is secured a 571,319 square foot (SF) portion of a regional
mall located in Johnson City, Tennessee. The mall is anchored
by JC Penney, Belk, Dick's Sporting Goods, Forever 21
and formerly a Sears. The Sears store closed in January 2020.
As of December 2018, in-line (<10,000 SF) occupancy
was 99% and in-line sales were $357 PSF. This
loan transferred to special servicing in November 2019 due to imminent
maturity default. In December 2019, the loan was modified
with a three-year loan maturity extension through May 2023 which
required the borrower to fund reserve accounts and pay $5 million
of principal prior to the May 2020 payment date. The mall was temporarily
closed due to the coronavirus outbreak, and the borrower was not
able to make those required reserve and principal payments. The
mall opened on May 4, 2020 after the temporary closure due to the
coronavirus outbreak. Due to the negative impacts of the coronavirus
outbreak, the borrower and special servicer entered into a Standstill
Agreement on June 11, 2020 whereby three full payments (P&I
and escrows) May, June and July (with the option of August) will
be deferred and repaid over 12 months. The Borrower was also permitted
to use existing reserves to cover operating shortfalls. The loan
was extended to December 4, 2020. A further extension option
to May 6, 2023 was also provided under specific conditions including
a $5.0MM principal payment and $10.0MM paid
into TI/LC and CapEx Reserves.
The fourth largest specially serviced loan is the Grand Central Mall Loan
($38.2 million -- 17.0% of the pool),
which is located in Vienna, West Virginia and is anchored by JC
Penney, Belk, Regal, H&M and Dunham's Sports.
The former Sears space has been demolished and the sponsor, Washington
Prime, has begun construction on new inline space which will add
four major tenants to the center to include Ross Dress For Less,
HomeGoods, TJ Maxx and PetSmart. The new expansion is expected
to be open in April 2021. The mall opened on May 22, 2020
after being temporarily closed due to the coronavirus outbreak.
The mall's performance peaked in 2015, however, starting in
2016 the property's NOI has declined annually. Due to the negative
impacts of the coronavirus outbreak, the borrower and special servicer
entered into a Standstill Agreement on July 15, 2020 whereby three
full payments (P&I and escrows) June, July and August (with
the option of September) will be deferred and repaid over 12 months.
The borrower was also permitted to use existing reserves to cover operating
shortfalls. The maturity date was extended to July 2021.
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_1133569.
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.
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.
Christopher Bergman
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
