KBRA Downgrades Three Ratings and Affirms All Other Ratings for GSMS 2018-RIVR
27 May 2025 | New York
KBRA downgrades the ratings for three classes and affirms all of the other outstanding ratings for GSMS 2018-RIVR, a CMBS SASB transaction. The downgrades are primarily driven by a recent reduction in the collateral property’s appraised value and concurrent increase in interest shortfalls, which are affecting all rated certificates. These classes are susceptible to further interest shortfalls from special servicing fees and other trust expenses and have a heightened risk of potential principal losses while the special servicer works to resolve the loan. Cumulative interest shortfalls total $18.9 million, while outstanding servicer advances total $6.7 million as of May 2025.
The servicer recently reported an updated appraised value of $87.4 million ($67 per sf) as of January 2025, resulting in an LTV of 354.5%. The previous appraised value was $160.0 million ($123 per sf) in January 2024. Based on the new appraised value there is a heightened risk that the special servicer could render a non-recoverability determination, thereby shutting off interest advances to all the rated certificates. The servicer first reported an appraisal reduction amount (ARA) of $226.0 million in April 2024, but did not provide the new appraised value. The ARA in the May 2025 reporting is $244.6 million.
The trust loan is in special servicing and the current workout strategy is foreclosure. According to the servicer's commentary, a receiver has been appointed to manage the property. The loan originally transferred to the special servicer on May 11, 2023, after the borrower, an affiliate of Blackstone Inc. (Blackstone), indicated that it would be unable to remit amounts owed under the loan as a result of declining property cash flow, tenant payment delinquencies, and a deterioration in the asset’s office market. In addition, the sponsor indicated that it will not support the property with additional equity. The loan’s third extension expired in July 2023, and the loan was not extended further.
KBRA previously downgraded the ratings of six classes of certificates following a surveillance review of the transaction in October 2024. The downgrades were primarily driven by the newly reported $226.0 million ARA, interest shortfalls impacting all of the rated classes, a deterioration in collateral performance, and the loan’s non-performing status with the special servicer. Currently, there are $6.1 million in outstanding P&I advances and the cumulative ASER is $17.4 million. Due to the magnitude of the current ASER, with the exception of Class A, none of the rated classes of certificates have received monthly interest distributions since June 2024. Class A had been receiving distributions of about 70.0% of its monthly accrued interest, but this dropped to 49.0% as of the May 2025 reporting.
The collateral for the transaction is a $309.8 million non-recourse, first lien floating rate mortgage loan that had an initial two-year term with five one-year extension options and requires monthly interest-only payments based on one month Term SOFR plus an initial spread of 1.495%. The financing includes mezzanine debt of $60.0 million. The loan is secured by the borrower’s fee simple interest in 1.3 million sf of River North Point, a Class-A, LEED Gold certified office property located in the River North submarket of Chicago, within the city’s CBD. The River North submarket has experienced a significant weakening in recent quarters. According to Colliers's Q1 2025 CBD Office Report, the overall Chicago office market vacancy was 29.1%, with the River North submarket posting total availability of 30.2%. According to the collateral property's March 2025 rent roll, occupancy decreased to 57.4%, compared to 65.3% as of June 2024 and 92.1% at issuance.
The servicer-reported DSCs are: 0.53x (FY 2023), 1.42x (FY 2022), 1.91x (FY 2021); at issuance, the underwritten DSC was 2.59x. KBRA maintains the loan’s K-LOC status and its KPO of Underperform.
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 which will be dependent on the value of the asset and the disposition of the loan. The assessment will consider the expected and actual losses, as well as the magnitude and extent of accrued interest shortfalls on the certificates.
Details for the classes with rating changes are as follows:
- Class A to CCC (sf) from B- (sf)
- Class B to C (sf) from CCC (sf)
- Class C to C (sf) from CC (sf)
To access ratings and relevant documents, click here.