KBRA Downgrades All Ratings for GSMS 2018-RIVR
2 May 2024 | New York
KBRA downgrades the ratings of seven classes for GSMS 2018-RIVR, a CMBS single borrower transaction. The ratings actions follow a surveillance review of the transaction. The downgrades are primarily driven by a deterioration in collateral performance stemming largely from declining occupancy in the context of a weak Chicago office market, as well as the loan’s non-performing status with the special servicer. The ratings actions also consider the likelihood of interest shortfalls reaching higher in the capital structure from special servicing fees and expenses along with the risk of the servicer limiting the amount of interest advancing on the loan given the amount of capital that may be required to maintain occupancy and operate the property.
The collateral for the transaction is a $309.8 million non-recourse, first lien floating rate mortgage loan 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, Illinois, within the city’s CBD. The loan sponsor and non-recourse carve-out guarantor is Blackstone Real Estate Partners VIII L.P.
The loan 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 matured in July 2023, and it was not extended further. As of the April 2024 reporting, the loan’s status is non-performing matured balloon, there are $3.6 million in outstanding P&I advances, and it carries an ARA of $168.5 million. According to the special servicer’s commentary, the property was listed for sale with JLL in late 2023; however, a listing price has not been provided.
KBRA analyzed the cash flow for the property utilizing information from the trustee and servicer to determine KNCF. The analysis produced a KNCF of $13.6 million and a KBRA value of $147.6 million ($114 per sf). The resulting in-trust KLTV is 209.9%, compared to 129.8% at last review and 99.6% at securitization. Based on KBRA’s value, it is likely that the trust will incur principal losses upon final disposition of the asset. KBRA maintains the loan’s K-LOC status and its KPO of Underperform.
Details for the classes with ratings changes are as follows:
- Class A to A- (sf) from AAA (sf)
- Class B to BBB- (sf) from AA- (sf)
- Class C to BB- (sf) from A- (sf)
- Class D to B- (sf) from BBB- (sf)
- Class E to CCC (sf) from BB- (sf)
- Class F to CC (sf) from B- (sf)
- Class G to C (sf) from CCC (sf)
To access rating and relevant documents, click here.
Click here to view the report.