GS Mortgage Securities Trust 2016-GS4 — Moody’s affirms six classes of GSMS 2016-GS4
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Rating Action: Moody’s affirms six classes of GSMS 2016-GS4Global Credit Research – 09 Feb 2021Approximately $779.1 million of structured securities affectedNew York, February 09, 2021 — Moody’s Investors Service, (“Moody’s”) has affirmed the ratings on six classes in GS Mortgage Securities Trust 2016-GS4, Commercial Mortgage Pass-Through Certificates, Series 2016-GS4 as follows:Cl. A-2, Affirmed Aaa (sf); previously on Dec 3, 2018 Affirmed Aaa (sf)Cl. A-3, Affirmed Aaa (sf); previously on Dec 3, 2018 Affirmed Aaa (sf)Cl. A-4, Affirmed Aaa (sf); previously on Dec 3, 2018 Affirmed Aaa (sf)Cl. A-AB, Affirmed Aaa (sf); previously on Dec 3, 2018 Affirmed Aaa (sf)Cl. A-S, Affirmed Aa2 (sf); previously on Dec 3, 2018 Affirmed Aa2 (sf)Cl. X-A*, Affirmed Aa1 (sf); previously on Dec 3, 2018 Affirmed Aa1 (sf)* Reflects interest-only classesRATINGS RATIONALEThe ratings on the five P&I classes were 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 rating on the IO class, Cl. X-A, was affirmed based on the credit quality of the referenced classes.The coronavirus outbreak, the government measures put in place to contain it, and the weak global economic outlook continue to disrupt economies and credit markets across sectors and regions. Our analysis has considered the effect on the performance of commercial real estate from the current weak US economic activity and a gradual recovery for the coming months. Although an economic recovery is underway, it is tenuous, and its continuation will be closely tied to containment of the virus. As a result, the degree of uncertainty around our forecasts is unusually high. 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.We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.Moody’s rating action reflects a base expected loss of 7.1% of the current pooled balance compared to 4.3% at Moody’s last review. Moody’s base expected loss plus realized losses is now 6.3% of the original pooled balance compared to 4.2% at the last review. Moody’s provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe 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 ACTIONThe methodologies used in rating all classes except interest-only classes were “Moody’s Approach to Rating Large Loan and Single Asset/Single Borrower CMBS” published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1190579 and “Approach to Rating US and Canadian Conduit/Fusion CMBS” published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1244778. The methodologies used in rating interest-only classes were “Moody’s Approach to Rating Large Loan and Single Asset/Single Borrower CMBS” published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1190579, “Approach to Rating US and Canadian Conduit/Fusion CMBS” published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1244778 and “Moody’s Approach to Rating Structured Finance Interest-Only (IO) Securities” published in February 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=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. DEAL PERFORMANCEAs of the January 12, 2021 distribution date, the transaction’s aggregate certificate balance has decreased by 12.3% to $900.7 million from $1.02 billion at securitization. The certificates are collateralized by 32 mortgage loans ranging in size from less than 1% to 11.1% of the pool, with the top ten loans (excluding defeasance) constituting 65.9% of the pool.Moody’s uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 18, the same as at Moody’s last review.As of the January 2021 remittance report, loans representing 88.3% were current or within their grace period on their debt service payments, 1.3% was 60 days delinquent, and 10.4% were 90 + days delinquent or in foreclosure.Nine loans, constituting 33.7% of the pool, that currently are on the master servicer’s watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody’s ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance.No loans have been liquidated from the pool and there have been no realized losses to the trust. Five loans, constituting 17.3% of the pool, are currently in special servicing, all of which transferred to special servicing since March 2020.The largest specially serviced loan is the Simon Premium Outlets Loan which is discussed in further detail below. Due to the historical performance, Moody’s has included this loan in the conduit statistics.The second largest specially serviced loan is the Hamilton Place Loan ($38.5 million — 3.8% of the pool), which represents a pari passu portion of a $98.3 million mortgage loan. The Hamilton Place loan is secured by the borrower’s fee simple interest in a 391,041 square feet (SF) component of a 1,167,689 SF enclosed, 2-story, regional mall in Chattanooga, Tennessee. The property is located along US Interstate 75 approximately 10 miles to the east of Chattanooga CBD. Hamilton Place Mall is part of the larger Hamilton Place development, which is the premier shopping and entertainment district in Chattanooga. The mall is the dominant mall in the trade area. No new competition is under construction or planned for development. The property offers over 200 retailers, over 30 restaurants, and was recently renovated in 2011 at a cost of $7.8 million. In May 2020, the loan transferred to special servicing due to imminent monetary default in relation to the coronavirus outbreak. The parent company of the borrower, CBL, recently filed for bankruptcy. The counsel and the borrower are reviewing options.The third largest specially serviced loan is the Poipu Shopping Village Loan ($28.0 million — 3.1% of the pool), which is secured in the borrowers leasehold interest in a 42,090 SF open air shopping center located in Kauai, Hawaii. The property was originally constructed in 1985 and renovated in 2004. The loan transferred to special servicing in July 2020 due to payment default after borrower failed to remit the April, May, and June 2020 debt service payments. The borrower has provided updated modification proposal and ground lease amendment for lender review. The loan is past due for the May 2020 payment. Moody’s estimates an aggregate $23 million loss for the specially serviced loans (29% expected loss on average).The credit risk of loans is determined primarily by two factors: 1) Moody’s assessment of the probability of default, which is largely driven by each loan’s DSCR, and 2) Moody’s assessment of the severity of loss upon a default, which is largely driven by each loan’s loan-to-value ratio, referred to as the Moody’s LTV or MLTV. As described in the CMBS methodology used to rate this transaction, we make various adjustments to the MLTV. We adjust the MLTV for each loan using a value that reflects capitalization (cap) rates that are between our sustainable cap rates and market cap rates. We also use an adjusted loan balance that reflects each loan’s amortization profile. The MLTV reported in this publication reflects the MLTV before the adjustments described in the methodology.Moody’s received full year 2019 operating results for 100% of the pool, and partial year 2020 operating results for 72% of the pool (excluding specially serviced and defeased loans). Moody’s weighted average conduit LTV is 123%, compared to 119% at the last review. Moody’s conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody’s net cash flow (NCF) reflects a weighted average haircut of 22.8% to the most recently available net operating income (NOI). Moody’s value reflects a weighted average capitalization rate of 10.1%.Moody’s actual and stressed conduit DSCRs are 1.72X and 0.92X, respectively, compared to 1.77X and 0.96X at last review. Moody’s actual DSCR is based on Moody’s NCF and the loan’s actual debt service. Moody’s stressed DSCR is based on Moody’s NCF and a 9.25% stress rate the agency applied to the loan balance.The largest loan with a structured credit assessment is the AMA Plaza Loan ($100.0 million — 11.1% of the pool), which is secured by the fee interest in a 52-story Class A tower located at 330 North Wabash Avenue, Chicago, Illinois, and the leasehold interest in an adjacent parking garage located at 401 North State Street. The loan represents a pari passu portion of a $130.0 million first mortgage loan. The property is also encumbered with a $72.4 million B-Note. The property benefits from its prime riverfront location within the North Michigan Avenue office submarket of the Chicago Central Business District. The property has received a LEED Gold certification and is a Chicago Landmark. The property was originally built in 1971 as IBM’s Chicago Headquarters. The property was 98.3% leased as of November 2020, the same as at securitization. This loan is interest-only throughout the five-year loan term. Moody’s structured credit assessment and stressed DSCR are baa1 (sca.pd) and 1.63X, respectively.The second loan with a structured credit assessment is the 540 West Madison Loan ($75.3 million — 8.4% of the pool), which is secured by the fee interest a 31-story, Class A office building located in the West Loop submarket of Chicago, Illinois. The loan represents a pari passu portion of a $162.3 million first mortgage loan. The property is also encumbered with a $54.2 million B-Note, a $108.5 million C-Note, and $75.0 million in mezzanine debt. The property was originally developed by Hines in 2003 to accommodate the operational needs of ABN AMRO and LaSalle National Bank. The subject was later purchased by Bank of America in 2007. As of January 2021, the property was 99% occupied, compared to 93% in December 2017 and 92% at securitization. Some of the tenants received rent relief through the pandemic with deferred payment plans. This loan is interest-only throughout the ten-year loan term. Moody’s structured credit assessment and stressed DSCR are a3 (sca.pd) and 1.57X, respectively.The top three conduit loans represent 22.7% of the pool balance. The largest conduit loan is the U.S. Industrial Portfolio Loan ($72.6 million — 7.3% of the pool), which is secured by a portfolio of 39 single-tenant warehouse / distribution and office / flex properties totaling 6.3 million square feet (SF) located throughout 17 states. The loan represents a pari passu portion of a $301.1 million first mortgage loan. As of December 2019, the portfolio was 98.8% leased compared to 94% in June 2018. This loan was placed on the servicer watch List due to deferred maintenance issues identified at several of the properties which are actively being remediated. The portfolio has averaged 99% occupancy since 2009. The loan has amortized 3.1% since securitization. Moody’s LTV and stressed DSCR are 126% and 0.84X, respectively, compared to 127% and 0.83X at the last review.The second largest conduit loan is the Quad at Whittier Loan ($70.1 million — 6.9% of the pool), which is secured by a grocery-anchored retail center located in Whittier, California approximately 12 miles southeast of Los Angeles. The property was originally built in 1950 as an open-air mall and was substantially rebuilt in 1991 after sustaining significant damage during the 1987 Whittier Narrows Earthquake. The property is anchored by Vallarta Supermarkets, a Hispanic-focused grocery store chain; Burlington Coat Factory; Ross Dress for Less; Marshall’s; TJ Maxx; Rite Aid; Petco and Michaels. As of November 2020, the property was 91% occupied compared to 89% at securitization. This loan is interest-only throughout the ten-year loan term. Moody’s LTV and stressed DSCR are 131% and 0.76X, respectively, the same as at the last review.The third largest loan is the Simon Premium Outlets Loan ($64.1 million — 6.3% of the pool), which is secured by the fee simple interest in two open-air outlet shopping centers totaling approximately 437,000 SF and located in Queenstown, Maryland and Pismo Beach, California. The loan represents a pari passu portion of a $92.9 million first mortgage loan. The two properties are cross-collateralized and cross-defaulted. The Queenstown Premium Outlets collateral was built in 1989 and is composed of six single-story buildings totaling 289,571 SF and 2,370 surface parking spaces. The Pismo Beach Premium Outlets collateral was built in 1994 and is composed of two, single-story buildings totaling 147,416 SF and 760 surface parking spaces. The loan transferred to special servicing in July 2020 due to payment default, and the loan was past due for the May payment. As of January 2021, the loan was over 90+ days delinquent. The lender is currently working on an additional modification for the loan. This loan has amortized 8.5% since securitization. Moody’s LTV and stressed DSCR are 110% and 1.04X, respectively, compared to 95% and 1.22X at the last review.REGULATORY DISCLOSURESFor 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_1243406.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.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK 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. Ashton Khan Associate Lead Analyst Structured Finance Group Moody’s Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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