Fitch Affirms GS Mortgage Securities Trust 2012-GCJ9

CHICAGO--()--Fitch Ratings has affirmed all rated classes of Goldman Sachs Commercial Mortgage Capital, L.P., GS Mortgage Securities Trust series 2012-GCJ9 commercial mortgage pass-through certificates. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The affirmations reflect sufficient credit enhancement of the classes relative to Fitch expected losses and the relatively stable performance of the pool since issuance. Fitch modeled losses of 3.9% of the remaining pool; expected losses on the original pool balance total 3.8%. There have been no realized losses to date. Fitch has designated nine loans (24%) as Fitch Loans of Concern (FLOC), which includes two specially serviced assets (0.8%). There are currently 14 loans on the servicer's watchlist (29.9%).

As of the September 2016 distribution date, the pool's aggregate principal balance has been reduced by approximately 4.8% to $1.32 billion from $1.39 billion at issuance. Approximately 60% of the pool's loans are amortizing balloon. There are five loans scheduled to mature in 2017 with a current balance of $191.5 million (14.5% of the pool), including three of the top-15 loans that have had positive performance since issuance. Five loans are fully defeased (2.7% of the pool). There are $235,934 of interest shortfalls affecting class NR.

The largest contributor to Fitch modelled losses is the Gansevoort Park Avenue hotel loan (4.75% of the pool), which is secured by a boutique luxury hotel located on the corner of Park Avenue and 29th Street in the NoMad section of Manhattan. The loan is on the servicer's watchlist due to a decline in net cash flow (NCF) since issuance. Per the year-end (YE) 2015 OSAR, the NCF was 37% below the issuers underwritten NCF, with debt service coverage ratio (DSCR) declining to 1.11x for YE 2015 from 1.42x at YE 2014 and 1.77x at issuance. The declines are attributed to increased expenses, primarily real estate taxes, which have increased to $3.6 million at YE 2015, compared to $3.3 million in 2014, $2.0 million in 2013, and $1.5 million at issuance. The underwritten real estate tax amount was based on an approved tax appeal, but the figure has more than doubled when compared to the issuer's underwriting. In addition, food & beverage (F&B) income has also declined compared to issuance.

Hotel room revenues remain relatively flat compared to issuance with YE 2015 only 2.6% below the issuer's underwritten amount. Occupancy improved to 86.7% as of YE 2015, compared to 83.6% at issuance. However, ADR and RevPAR both declined over the same time period, reporting at $350.58 and $303.95, respectively, compared $386.83 (ADR) and $323.39 (RevPAR) at issuance. Although Fitch calculated losses based on in-place cash flow and a stressed cap rate, losses may be mitigated given the strong location and quality of the asset. Fitch is closely monitoring the property's performance.

Two of the top-15 loans scheduled to mature in 2017 are secured by hotel portfolios: The $88.3 million Cooper Hotel Portfolio (6.7% of the pool; maturing Nov. 2016) collateralized by 11 full service and limited service properties in three states (FL, MI, TN), and the TMI Hotel Portfolio (3.3%; maturing October 2016) secured by 10 limited service and extended stay hotels in eight states (TX, AZ, OH, WY, OK, MI, WI, MN). Both portfolios have experienced significant increases in cash flow since issuance driven by positive operating performance, with increased occupancy, ADR, and/or RevPAR at all properties. Per the trailing-twelve-month (TTM) May 2016 Smith Travel Research (STR) reports, the Cooper Hotel Portfolio's weighted average (WA) occupancy, ADR, and RevPAR were 73.1%, $112.83, and $83, respectively, compared to 68.5%, $98.95, and $68.22 at issuance. Per the TTM March 2016 STR reports, the TMI Hotel Portfolio's WA occupancy, ADR, and RevPar were 78.5%, $113.82, and $90.41, respectively, compared to 74.6%, $102.92, and $76.77 at YE 2013. All of the properties in both portfolios are currently outperforming or in-line with their respective comp sets.

The third near-term maturing top-15 loan is the $35.0 million 222 Broadway loan (2.7%), maturing in June 2017. The loan is secured by a 31-story office tower located in Manhattan's Financial District, directly south of City Hall Park, and adjacent to the new Fulton Street Transit Center and one block east of the new WTC Transportation Hub. The property NOI had a temporary decline in 2014 due to Bank of America (74% of the NRA at issuance) exercising its contraction rights in 2013 and vacating 91,609-sf, downsizing its footprint to 483,977-sf (62% NRA). In 2014, the contracted space and existing vacant space was leased to two new tenants, Conde Nast (10.8% NRA) and WeWork(16% NRA), with rent abatements built into both leases through fourth quarter 2014. Occupancy was 97.5% per the March 2016 rent roll. The first quarter 2016 DSCR was 2.42x, compared to 2.62x at YE 2015, 1.16x at YE 2014, and 1.49x at YE 2013.

RATING SENSITIVITIES

The Rating Outlooks for all but classes B and C are considered Stable due to sufficient credit enhancement (C/E), and relatively stable performance of the pool since issuance. The Outlooks for classes B and C are revised to Positive as C/E is expected to improve over the next 13 months from on-going monthly amortization and expected repayment from maturing loans. Should performance across the pool continue to improve, class C/E increase, and loans repay as expected, positive rating migrations are possible on these classes. However, should there be material economic or asset level event changes that affect the transaction's portfolio-level metrics, including modelled losses exceeding Fitch expectations or additional loans transferring to special servicing, the classes could be subjected to negative ratings migration.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10

No third-party due diligence was provided or reviewed in relation to this rating action.

Fitch has affirmed the following ratings and revised Rating Outlooks as indicated:

GS Mortgage Securities Trust series 2012-GCJ9

--$6.4 million class A-1 at 'AAAsf'; Outlook Stable;

--$202.5 million class A-2 at 'AAAsf'; Outlook Stable;

--$607.4 million class A-3 at 'AAAsf'; Outlook Stable;

--$90 million class A-AB at 'AAAsf'; Outlook Stable;

--Interest-only class X-A at 'AAAsf'; Outlook Stable;

--$111.1 million class A-S at 'AAAsf'; Outlook Stable;

--$90.3 million class B at 'AA-sf'; Outlook revised to Positive from Stable;

--$57.3 million class C at 'A-sf'; Outlook revised to Positive from Stable;

--$57.3 million class D at 'BBB-sf'; Outlook Stable;

--$27.8 million class E at 'BBsf'; Outlook Stable;

--$22.6 million class F at 'Bsf'; Outlook Stable.

Fitch does not rate the interest-only class X-B or the $50.3 million class G.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)

https://www.fitchratings.com/site/re/886006

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)

https://www.fitchratings.com/site/re/882401

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/site/re/883130

U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)

https://www.fitchratings.com/site/re/873395

Related Research

GS Mortgage Securities Trust 2012-GCJ9 -- Appendix

https://www.fitchratings.com/site/re/710213

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1013100

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1013100

Endorsement Policy

https://www.fitchratings.com/regulatory

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Contacts

Fitch Ratings
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Benson Thomas
Director
+1-212-908-0645
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Surveillance Analyst
Jeff Dilliberto
Director
+1-312-368-3268
or
Committee Chairperson
Christopher Bushart
Senior Director
Phone +1-212-908-0648
or
Media Relations
Sandro Scenga
+1-212-908-0278
New York
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Benson Thomas
Director
+1-212-908-0645
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Surveillance Analyst
Jeff Dilliberto
Director
+1-312-368-3268
or
Committee Chairperson
Christopher Bushart
Senior Director
Phone +1-212-908-0648
or
Media Relations
Sandro Scenga
+1-212-908-0278
New York
sandro.scenga@fitchratings.com