NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned the following ratings and Rating Outlooks for GS Mortgage Securities Trust (GSMS) 2016-GS2 Commercial Mortgage Pass-Through Certificates, Series 2016-GS2.
--$11,733,000 class A-1 'AAAsf'; Outlook Stable;
--$137,578,000 class A-2 'AAAsf'; Outlook Stable;
--$165,000,000 class A-3 'AAAsf'; Outlook Stable;
--$187,977,000 class A-4 'AAAsf'; Outlook Stable;
--$23,162,000 class A-AB 'AAAsf'; Outlook Stable;
--$570,488,000b class X-A 'AAAsf'; Outlook Stable;
--$42,224,000b class X-B AA-sf; Outlook Stable;
--$45,038,000c class A-S 'AAAsf'; Outlook Stable;
--$42,224,000c class B 'AA-sf'; Outlook Stable;
--$122,918,000c class PEZ 'A-sf'; Outlook Stable;
--$35,656,000c class C 'A-sf'; Outlook Stable;
--$42,223,000a class D 'BBB?sf'; Outlook Stable;
--$42,223,000ab class X-D 'BBB?sf'; Outlook Stable;
--$20,643,000a class E 'BB?sf'; Outlook Stable;
--$7,506,000a class F 'B?sf'; Outlook Stable;
--$31,903,230a class G 'NR'.
a Privately placed and pursuant to rule 144A.
b Notional amount and interest only.
c The class A-S, class B, and class C certificates may be exchanged for class PEZ certificates, and class PEZ certificates may be exchanged for the class A-S, class B, and class C certificates.
The ratings are based on information provided by the issuer as of May 9, 2016. Fitch does not rate the $31,903,230 class G. The certificates represent the beneficial ownership interest in the trust, primary assets of which are 37 loans secured by 115 commercial properties having an aggregate principal balance of approximately $750.6 million as of the cutoff date. The loans were contributed to the trust by Goldman Sachs Mortgage Company.
Fitch reviewed a comprehensive sample of the transaction's collateral including site inspections on 83.4% of the properties by balance and asset summary reviews and cash flow analysis of 93.8% of the pool.
KEY RATING DRIVERS
Fitch Leverage: The Fitch stressed debt service coverage ratio (DSCR) on the trust-specific debt is 1.24x, higher than the 2015 and YTD 2016 averages of 1.18x and 1.17x, respectively, for the other Fitch-rated U.S. multiborrower deals. The Fitch stressed loan-to-value (LTV) ratio on the trust-specific debt is 103.4%, lower than the 2015 and YTD 2016 averages of 109.3% and 107.9%, respectively, for the other Fitch-rated deals.
Highly Concentrated Pool: The largest 10 loans in the transaction compose 62.7% of the pool by balance. Compared to other Fitch-rated U.S. multiborrower deals, the concentration in this transaction is higher than the 2015 and YTD 2016 average concentrations of 49.3% and 54.8%, respectively. The pool's concentration results in a loan concentration index (LCI) of 539, which is higher than the 2015 average of 367 and 2016 YTD average of 415.
Credit Opinion Loan: One loan in the pool received shadow ratings. The Veritas Multifamily Pool 1 (9.99% of the pool) received an investment-grade rating of 'AAAsf' on a fusion basis and a 'AAAsf' rating on a stand-alone basis.
Interest-Only Loans: 17 loans that make up 62.5% of the pool are full interest-only. This is higher than the average of 23.3% for 2015 and 30.8% for YTD 2016 of the other Fitch-rated U.S. multiborrower deals. In addition, 14 loans which comprised 23.3% of the pool are partial interest-only; this share is lower than the average of 43.1% for 2015 and 41.1% for YTD 2016 of the other Fitch-rated U.S. multiborrower deals. Overall, the pool is scheduled to pay down by 5.08%, compared with the averages of 11.7% for 2015 and 9.9% YTD for 2016 for the other Fitch-rated U.S. deals.
ADDITIONAL RATING DRIVERS
Sponsor Concentration: The top 10 sponsors comprise 75.7% of the pool, including a single sponsor's 17.3% share. This results in a sponsor concentration index (SCI) of 833, which is higher than the 2015 and YTD 2016 averages of 410 and 461, respectively, for other Fitch-rated multiborrower deals.
Mortgage Coupons: The weighted average (WA) mortgage coupon for this pool of loans is 4.55%, well below historical averages. Fitch accounted for increased refinance risk in a higher interest rate environment by analyzing sensitivity to increased interest rates in conjunction with Fitch's stressed refinance rates, which were 9.07% on a WA basis.
For this transaction, Fitch's NCF was 6.4% below the most recent year's NOI (for properties for which a full year NOI was provided, excluding properties that were stabilizing during this period). The following rating sensitivities describe how the ratings would react to further NCF declines below Fitch's NCF. The implied rating sensitivities are only indicative of some of the potential outcomes and do not consider other risk factors to which the transaction is exposed. Stressing additional risk factors may result in different outcomes. Furthermore, the implied ratings, after the further NCF stresses are applied, are more akin to what the ratings would be at deal issuance had those further stressed NCFs been in place at that time.
Fitch evaluated the sensitivity of the ratings assigned to GSMS 2016-GS2 certificates and found that the transaction displays average sensitivity to further declines in NCF. In a scenario in which NCF declined a further 20% from Fitch's NCF, a downgrade of the junior 'AAAsf' certificates to 'A-sf' could result. In a more severe scenario, in which NCF declined a further 30% from Fitch's NCF, a downgrade of the junior 'AAAsf' certificates to 'BBB-sf' could result. The presale report includes a detailed explanation of additional stresses and sensitivities on pages 10.
DUE DILIGENCE USAGE
Fitch was provided with third party due diligence information from Ernst & Young LLP. The third-party due diligence information was provided on Form ABS Due Diligence-15E and focused on a comparison and re-computation of certain characteristics with respect to each of the mortgage loans. Fitch considered this information in its analysis and the findings did not have an impact on the analysis.
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage
Transactions (pub. 27 Aug 2015)
Criteria for Analyzing Multiborrower U.S. and Canadian Commercial
Mortgage Transactions (pub. 03 Mar 2016)
Criteria for Rating Caps and Limitations in Global Structured Finance
Transactions (pub. 28 May 2014)
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
Rating Criteria for Structured Finance Servicers (pub. 23 Apr 2015)
Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)
U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S.
Re-REMIC Criteria (pub. 13 Nov 2015)
GS Mortgage Securities Trust 2016-GS2 - Appendix
Dodd-Frank Rating Information Disclosure Form