KBRA Withdraws Two Ratings and Affirms All Other Ratings for GSMS 2015-GC28
31 Jan 2025 | New York
KBRA withdraws two ratings and affirms all other ratings for GSMS 2015-GC28, a $135.3 million CMBS conduit transaction, which has ten assets remaining in the underlying pool, seven (83.2% of pool balance) of which have been identified as K-LOCs. The rating actions reflect the increased enhancement levels from loan payoffs which offsets the high percentage of K-LOCs in the pool. The rating withdrawals on Classes X-C and X-D are done in accordance with KBRA’s Methodology for Rating Interest-Only Certificates because the transaction has 10 or fewer loans remaining.
As of the January 2025 remittance period, there are six delinquent loans, four of which are specially serviced. Of the six loans, five are matured and non-performing and one is 90+ days delinquent. KBRA identified seven loans (83.2%) in the pool as K-LOCs, two of which have estimated losses. The details concerning the four largest defaulted loans are listed below.
The Avenue at Lubbock (Largest, 26.4% of the pool balance, Underperform, K-LOC, Specially Serviced, Matured Non-Performing)
- The loan is collateralized a 788-bed (263 unit), Class-A student housing complex located in Lubbock, Texas, approximately two miles west of Texas Tech University (TTU). The property consists of 19, three-story buildings.
- KBRA maintains the loan's K-LOC designation and KPO of Underperform based on its transfer to the special servicer in December 2024 after failing to pay off at loan maturity. Financial performance at the subject property declined between 2020 and 2023 as a result of an increase in operating expenses, mainly repairs and maintenance expenses. The property has remained listed for sale since August 2024.
- The servicer-reported occupancies and DSCs are: 93.0% / 1.28x (YTD June 2024); 94.0% / 1.15x (FY 2023); at closing these were 97.0% / 1.28x. At this time, KBRA does not estimate a loss on this asset.
411 Seventh Avenue (2nd largest, 13.4%, Underperform, K-LOC, Specially Serviced, Matured Non-Performing)
- The loan is collateralized a 301,771 sf, Class-B office building located in the Pittsburgh, Pennsylvania CBD. The development consists of a 16-story building that features a 14,711 sf conference center and 5,425 sf of ground-floor retail space. The asset does not offer onsite parking; however, it is within walking distance of several neighborhood parking facilities.
- KBRA maintains the loan's K-LOC designation and KPO of Underperform due to its matured non-performing status with the special servicer, along with a decline in occupancy and DSC since closing. The subject property faced a decline in occupancy since issuance, with the most recent occupancy reported at 59.0% in September 2024. Additionally, the largest tenant at the property, Duquesne Light Company (51.3% of base rent), stated that it will vacate the property prior to lease expiration in October 2029, further decreasing occupancy to 23.0%. Given the timing of the tenant's exit plans, the borrower was unable to refinance the loan prior to loan maturity in January 2025.
- The servicer-reported occupancies and DSCs are: 59.0% / 1.12x (YTD September 2024); 67.0% / 1.12x (FY 2023); at closing these were 83.0% / 1.28x. KBRA's analysis resulted in an estimated loss of $5.7 million (31.5% loss severity). The loss is based on a KBRA liquidation value of $12.7 million ($42 per sf).
Iron Horse Hotel (3rd largest, 11.6%, Underperform, K-LOC, Specially Serviced, 90+ days Delinquent)
- The loan is collateralized by a six-story, 100-key, full-service boutique hotel located in Milwaukee, Wisconsin, within the Walker’s Point neighborhood south of the CBD.
- KBRA maintains the loan’s K-LOC designation and KPO of Underperform due to its delinquency and specially serviced status. The property experienced declining cash flow performance prior to COVID-19 and the loan was transferred to the special servicer for imminent monetary default during the April 2020 remittance period. In mid-2022, the borrower filed for bankruptcy protection. Servicer watchlist commentary in July 2024 stated the borrower and lender have entered into a forbearance agreement and that the lender remains engaged with the bankruptcy plan. No details have been provided regarding the forbearance agreement though the loan remains specially serviced and delinquent as of the January 2025 remittance period.
- The servicer-reported occupancies and DSCs are: 61.0% / -0.03x (FY 2023); 60.0% / 0.07x (FY 2022); at closing these were 80.0% / 1.83x. An appraisal dated September 2024 valued the property at $24.0 million ($240,000 per key), which is 17.8% below the $29.2 million ($292,000 per key) value at issuance. KBRA’s analysis resulted in an estimated loss of $11.9 million (75.3% estimated loss severity). The loss is based on a KBRA liquidation value of $6.8 million ($68,327 per key). The value is derived from a direct capitalization approach using a KNCF of $751,597 and a market based capitalization rate of 11.00%.
Margas Retail Portfolio (4th largest, 11.6%, Underperform, K-LOC, Matured Non-Performing)
- The loan is collateralized by a 67,940 sf portfolio consisting of nine retail properties, located in Silver Spring, Maryland (92.5%) and Fairfax Virginia (6.5%). Five of the properties are single-tenant restaurants, two are multi-tenant retail/office buildings and two are multi-use retail buildings.
- KBRA maintains the loan’s K-LOC designation and KPO of Underperform due to its matured non-performing status after failing to pay off at loan maturity in January 2025. Watchlist commentary in December 2024 stated the servicer presented a 30-day forbearance option to the borrower if they secure a commitment letter from a lender but could not pay off in time at loan maturity. The borrower was advised that the loan will transfer to special servicing if not paid off at maturity. Servicer commentary in January 2025 stated the borrower requested additional days to close and has provided an executed term sheet.
- The servicer-reported occupancies and DSCs are: 88.0% / 1.52x (YTD September 2024); 96.0% / 1.41x (FY 2023); at closing these were 95.0% / 1.51x. At this time, KBRA does not estimate a loss for this asset.
Of the remaining three K-LOCs (20.2%), two are specially serviced (9.0%). At this time, KBRA does not estimate any losses for the three K-LOCs.
Rating Sensitivities
Future rating actions will be dependent upon the ongoing assessment of the timing and likelihood of ultimate payment of principal and accrued interest on the rated certificates. The assessment will consider the expected and actual losses on the remaining assets in the transaction, as well as the magnitude and extent of interest shortfalls, if any, on the certificates.
To access ratings and relevant documents, click here.
Related Publication
Methodologies
- CMBS: North American CMBS Single Borrower & Large Loan Rating Methodology
- CMBS: North American CMBS Property Evaluation Methodology
- CMBS: Methodology for Rating Interest-Only Certificates in CMBS Transactions
- Structured Finance: Global Structured Finance Counterparty Methodology
- ESG Global Rating Methodology