Fitch Downgrades 5 Distressed Classes of GSMSC II 2006-GG8; Affirms Senior Classes
NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded five classes and affirmed 16 classes of GS Mortgage Securities Corporation II (GSMSC II) commercial mortgage pass-through certificates, series 2006-GG8 due to increased loss expectations on specially serviced loans and further deterioration of loan performance. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
Fitch modeled losses of 13.7% of the remaining pool; expected losses on the original pool balance total 14.9%, including losses already incurred, an increase from 13.3% at Fitch's last rating action. The pool has experienced $242.1 million (5.1% of the original pool balance) in realized losses to date. Fitch has designated 82 loans (43.1%) as Fitch Loans of Concern, which includes 17 specially serviced assets (11.5%).
As of the January 2014 distribution date, the pool's aggregate principal balance has been reduced by 32.1% to $2.87 billion from $4.24 billion at issuance. One loan is defeased (0.2% of the pool). Interest shortfalls of approximately $65.4 million are currently affecting classes C through S.
The Negative Outlook on class A-M reflects the increase in modeled maturity defaults and high percentage of Fitch Loans of Concern remaining in the pool. Approximately 80% of the pool has a Fitch loan to value (LTV) greater than 90%, which can indicate difficulty in refinancing at maturity.
The largest contributor to modeled losses is the real-estate owned (REO) Ariel Preferred Portfolio (3.1% of the pool balance). The retail portfolio consists of three outlet centers located in Laughlin, NV; Tulare, CA; and Medford, Minnesota. Three of the original six properties have been sold. The portfolio had transferred to special servicing in June 2009 for imminent default. The most recent servicer reported average portfolio occupancy is 79% as of third-quarter 2013, compared to the overall portfolio occupancy of 82.7% at issuance.
The next largest contributor to modeled losses is the specially-serviced Rubloff Retail Portfolio loan (2%), which is secured by four malls in tertiary market comprising 1.26 million square feet (sf). The loan transferred to special servicing in late November 2012 for imminent default. As of December 2013, the combined occupancy of the portfolio declined to 67% as several anchor tenants have vacated or filed for bankruptcy. The largest property by allocated loan balance is the Hutchinson Mall, which has a JCPenney and Sears with lease expirations of 2015 and 2014, respectively. The Lakewood Mall also has a JCPenney with a 2015 lease expiration. Both JCPenneys at the two malls have extension options.
The third largest contributor to modeled losses is the Gallery at Cocowalk, which represents 2.7% of the pool balance. The modified loan is split between an A-note (1.7% of the pool) and B-note or 'hope note' (1% of the pool). The loan is backed by an approximately 196,500 sf mixed-use property located in Coconut Grove, FL, south of Miami. The tenants include a movie theater and a mix of national retailers and chain restaurants. The servicer reported June 2013 occupancy was 85%.
The largest Fitch Loan of Concern is the Fair Lakes Office Park loan (4.1% of the pool). The pari passu loan is secured by an approximately 1.25 million square foot, nine building office property located in Fairfax, VA near I-66 and the Fairfax County Parkway. The reported occupancy as of Sept. 2013 was 82% (down from 99% at issuance), with significant rollover anticipated in 2015 prior to the loan maturity in 2016.
Fitch downgrades the following classes as indicated:
--$37.1 million class D to 'CCsf' from 'CCCsf', RE 0%;
--$37.1 million class E to 'CCsf' from 'CCCsf', RE 0%;
--$42.4 million class F to 'Csf' from 'CCsf', RE 0%;
--$53 million class G to 'Csf' from 'CCsf', RE 0%;
--$47.7 million class H to 'Csf' from 'CCsf', RE 0%.
Fitch affirms the following classes as indicated:
--$16.8 million class A-3 at 'AAAsf'; Outlook Stable;
--$59.8 million class A-AB at 'AAAsf'; Outlook Stable;
--$1.6 billion class A-4 at 'AAAsf'; Outlook Stable;
--$160.1 million class A-1A at 'AAAsf'; Outlook Stable;
--$424.3 million class A-M at 'Asf'; Outlook to Negative from Stable;
--$302.3 million class A-J at 'CCCsf', RE 75%;
--$26.5 million class B at 'CCCsf', RE 0%;
--$53 million class C at 'CCCsf', RE 0%.
--$7.2 million class J at 'Dsf', RE 0%.
Classes K, L, M, N, O, P and Q remain at 'Dsf', RE 0% due to realized losses.
The class A-1 and A-2 certificates have paid in full. Fitch does not rate the fully depleted class S certificates. Fitch previously withdrew the rating on the interest-only class X certificate.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria