DBRS Morningstar Changes Trends on All Classes of GS Mortgage Securities Trust 2013-G1 to Stable from Negative

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2013-G1 issued by GS Mortgage Securities Trust 2013-G1 as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (low) (sf)
-- Class DM at BB (sf)

DBRS Morningstar also changed the trends on all ratings to Stable from Negative.

The rating confirmations and Stable trends are generally reflective of DBRS Morningstar’s outlook for the continued improvement in performance of the underlying loans, all of which are backed by mall property types. All three loans have been kept current since the start of the Coronavirus Disease (COVID-19) pandemic, with no relief requests processed to date. Performance has been generally healthy, with none of the loans on the servicer’s watchlists, and the sponsors appear committed to the respective loans and collateral assets, all of which are generally well positioned as further described below.

The trust collateral consists of three fixed-rate loans individually secured by two outlet malls and one regional mall: Great Lakes Crossing Outlets (Auburn Hills, Michigan), Katy Mills (Katy, Texas), and Deptford Mall (Deptford, New Jersey), located in established suburban markets outside of Detroit, Houston, and Philadelphia, respectively. The three loans reported an aggregate outstanding principal balance of $492.2 million as of the September 2021 remittance, representing a collateral reduction of 13.3% from issuance because of scheduled loan amortization on the Great Lakes Crossing Outlets and Deptford Mall loans. The Katy Mills loan is interest only (IO) for the entire term.

Great Lakes Crossing Outlets, representing 37.4% of the allocated pool balance, is secured by a 1.1 million-square-foot (sf) portion of a 1.4 million-sf outlet center in Auburn Hills, built in 1998 and renovated in 2010 by the former sponsor, Taubman Centers, Inc. (Taubman). Taubman was acquired by Simon Property Group (Simon) in late 2020; Simon is now the loan sponsor, and a Simon affiliate serves as the property manager. The 30-year loan matures in January 2023 and amortizes according to a 30-year schedule. The loan is shadow anchored by a 25-screen AMC Theatres location as well as a Bass Pro Shops Outdoor World. As of the September 2021 rent roll, the collateral was 89.7% occupied, a slight decrease from 92.6% at YE2020. The largest collateral tenants at the property are Burlington Coat Factory (7.2% of net rentable area (NRA); lease expires in January 2030), Round 1 Bowling & Amusement (Round 1; 5.2% of NRA; lease expires in September 2027), Forever 21 (4.2% of NRA; lease expires in January 2023), and Bed Bath & Beyond (3.9% of NRA; lease expires in January 2025). The property’s tenant mix, which includes traditional retailers, outlet formats, and entertainment options, mimics the “Mills” properties owned and operated by Simon, such as the Katy Mills property discussed below, making the subject a natural addition to the existing Simon portfolio.

Overall, Great Lakes Crossing Outlets reported sales of $165 per sf (psf) for the trailing nine months (T-9) ended September 30, 2020, which is a decline from sales of $239 psf, $250 psf, and $249 psf for the T-9 periods ended September 2019, September 2018, and September 2017, respectively. As of the most recent financial reporting, the loan reported a YE2020 debt service coverage ratio (DSCR) of 1.92 times (x), a moderate decline from the prior two years’ figures of 2.47x. The sales and cash flow declines in 2020 were a direct result of the coronavirus pandemic, but DBRS Morningstar believes the property is well positioned with a favourable location within the Detroit area and a diverse shadow and collateral tenant mix that includes many retailers as well as popular attractions such as Peppa Pig World of Play, Legoland Discovery Center, and Sea Life Aquarium, among others.

The Deptford Mall loan, representing 34.2% of the allocated pool balance, is secured by 343,910 sf of in-line space within a 1.0 million-sf regional mall in Deptford, which is located within the Philadelphia metropolitan statistical area. At issuance, the loan was bifurcated into a $179.4 million senior pooled amount and a $25.1 million subordinate, nonpooled rake bond that was also contributed to the subject trust. As of the September 2021 remittance, the senior portion of the debt had a current balance of $147.4 million while the subordinate piece supporting the rake bond had a current balance of $20.6 million, representing a whole-loan collateral reduction of 17.8% since issuance. The mall is owned and operated by Macerich and is anchored by noncollateral tenants including Boscov’s, Macy’s, JCPenney (JCP), Dick’s Sporting Goods (Dick’s), and Round 1. Dick’s and Round 1 were both added as part of a backfill of the former Sears space (which closed in 2018) and opened in 2020. As of this review, the subject’s JCP location has not been listed for closure in any of the court filings or announcements made by the company following its May 2020 bankruptcy filing and subsequent acquisition by a joint venture that included Simon and another major mall operator, Brookfield Properties.

As of the June 2021 rent roll, the subject had a collateral occupancy of 87.3%, which is up from the YE2020 rate of 78.8% and closer to the YE2019 rate of 89.8%. The largest collateral tenants include H&M (6.5% of NRA; lease expires in January 2026), Forever 21 (5.9% of NRA; lease expires in January 2023), Victoria’s Secret (3.2% of NRA; lease expires in January 2024), and American Eagle (2.6% of NRA; lease expires in January 2027). As of the YE2020 sales report, tenants that occupy more than 10,000 sf reported sales of $142 psf, a decline from the pre-coronavirus figure of $214 at YE2019. Average sales for tenants less than 10,000 sf as of theYE2020 sales report were reported at $408 psf. As of the most recent financial reporting, the loan reported a YE2020 DSCR of 1.11x, a decline from the YE2019 and YE2018 DSCRs of 1.81x and 1.93x, respectively. A DBRS Morningstar analyst visited the property on a Friday afternoon in September and noted that the property’s parking lot was generally full and that the mall’s interior was teeming with shoppers. Based on these observations, and given the occupancy improvements in 2021 as well as the easing of disruptions caused by the coronavirus pandemic, DBRS Morningstar expects that cash flows will begin trending up within the near to moderate term.

Katy Mills, representing 28.4% of the allocated loan balance, is secured by a 1.2 million-sf portion of a 1.6 million-sf regional mall in Katy. The loan is the sole IO loan, with an upcoming maturity in December 2022. The loan is sponsored through a joint venture between Simon and KanAm. Noncollateral tenants include a somewhat eclectic mix for an outlet mall and include a Walmart Supercenter, a Hilton Garden Inn hotel, and a Caliber Collision in the out lot, along with a former Toys “R” Us, which vacated its space in 2018 following its bankruptcy filing and remains dark as of this review.

As of the May 2021 rent roll, the collateral was 80.2% occupied at an average rental rate of $20.22 psf. Occupancy has improved slightly from the YE2020 occupancy rate of 76.1%, but remains below the YE2019 occupancy rate of 89.0%. Collateral anchors include Bass Pro Shops Outdoor World (12.0% of NRA; lease expires in October 2024), Burlington Coat Factory (8.3% of NRA; lease expires in January 2025), AMC Theatres (6.4% of NRA; lease expires in October 2029), and Marshalls (2.7% of NRA; lease expires in January 2030). As of the most recent financial reporting, the loan reported a very strong DSCR of 4.91x, compared with the YE2019 DSCR of 5.42x and YE2018 DSCR of 5.55x. Updated sales were requested but have not been provided to date. Given the similarly diverse tenant mix as previously discussed for the Great Lakes Crossing Outlets property, as well as the subject’s location within a desirable Houston suburb, DBRS Morningstar expects the loan to be well positioned for a refinance at the 2022 maturity date, despite the lack of amortization and general hesitation from lenders when it comes to placing debt on mall property types.

At issuance, DBRS Morningstar shadow-rated all three loans investment grade. With this review, DBRS Morningstar confirmed that the performance of these loans remains consistent with investment-grade loan characteristics. Overall, the collateralized properties are well established in their respective markets and have satisfactory in-line sales performance, high-quality sponsorship, and low-leverage financing.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Class X-A is an IO certificate that references a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance related data.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar-rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology (March 26, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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