NEW YORK--(BUSINESS WIRE)--
Fitch Ratings has affirmed all classes of GS Mortgage Securities
Corporation II, commercial mortgage pass-through certificates, series
2005-GG4 (GSMSC II 2005-GG4). A detailed list of rating actions follows
at the end of this press release.
KEY RATING DRIVERS
The affirmations are due to the relatively stable performance of the
collateral pool since Fitch's last rating action. Fitch modeled losses
of 11.9% of the remaining pool; expected losses on the original pool
balance total 10.7%, including $125.8 million (3.1% of the original pool
balance) in realized losses to date. Fitch has designated 54 loans (34%)
as Fitch Loans of Concern, which includes 17 specially serviced assets
As of the February 2014 distribution date, the pool's aggregate
principal balance has been reduced by 36.1% to $2.55 billion from $4
billion at issuance. There are 23 defeased loans (19%). Cumulative
interest shortfalls totaling $22.3 million are currently affecting
classes F through P.
The three largest contributors to modeled losses remain the same as the
last rating action, the largest of which is the One HSBC Center loan
(2.9% of the pool). The loan is secured by an 850,476 square foot (sf)
office property located in Buffalo, NY. The loan was transferred to
special servicing in November 2013 for imminent default. As of the
February 2014 remittance report, the loan was classified as greater than
90 days delinquent.
The property's two largest tenants, HSBC Bank USA (77% of the property
square footage) and Phillips Lytle (10% of the property square footage),
did not renew their leases which expired in October and December 2013,
respectively, as was expected at Fitch's last rating action. The two
tenants have already vacated the vast majority of their occupied spaces
and are expected to fully vacate by the end of first quarter of 2014
(1Q'14). This would drop occupancy below 10%.
The special servicer indicated a receiver was put in place in December
2013. The receiver is in the process of collecting information from the
prior leasing and management team and is preparing and developing new
marketing materials to advertise the property's vacancies. Fitch expects
lease-up time could be lengthy given the limited leasing interest to
date and a weak submarket. According to REIS and as of 4Q'13, the
overall Buffalo metro office market reported a vacancy of 14% and the
submarket reported a vacancy of 16.2%. Fitch applied a dark value
analysis to estimate an expected recovery given the high property
vacancy, making assumptions for market rent declines, downtime between
leases, carrying costs, and re-tenanting costs.
The second largest contributor to modeled losses is the Wells Fargo
Center loan (7.8%), which is secured by a 1.21 million sf office
property located in Denver, CO. Property occupancy has continued to
decline year-over-year due to multiple tenants vacating at or prior to
their scheduled lease expirations. As of the September 2013 rent roll,
the property was 83% occupied, representing a drop from the 87% reported
at year-end (YE) 2012, 88% at YE 2011, and 99% at YE 2010.
According to the September 2013 rent roll, approximately 12% of the
total property square footage rolls prior to the loan's April 2015
maturity date. According to REIS and as of 4Q'13, the Midtown Denver
office submarket reported a vacancy of 15.6%. New leases have generally
been signed at lower rents than expiring leases. The debt service
coverage ratio, on a net operating income basis, was 1.54x at YE 2012,
gradually declining from the 1.59x, 1.62x, 1.77x, and 1.62x reported at
YE 2011, YE 2010, YE 2009, and at issuance, respectively.
The third largest contributor to modeled losses is the
specially-serviced Temple Mall asset (1.3%). The asset is a 559,309 sf
retail property located in Temple, TX. The loan was transferred to
special servicing in September 2008 due to imminent default and became
real-estate owned in September 2011. As of YE 2013, the property was 82%
occupied, which has gradually improved as the expected opening of a new
IMAX theatre in the spring of 2014 has generated some positive leasing
The ratings of the 'AAA' classes are expected to remain stable due to
increasing credit enhancement and continued paydown.
The Negative Outlooks on classes A-J and B reflect property performance
concerns for several of the top 15 loans, with major tenant vacancies
and rollover risk, combined with secondary and tertiary market exposure.
Fitch will also continue to monitor the tenancy and leasing status of
the One HSBC Center loan. Further, the Negative Outlooks also reflect
the maturity risk associated with 95% of pool scheduled to mature in
Distressed classes (those rated below 'Bsf') may be subject to further
downgrades as additional losses are realized.
Fitch has affirmed the following classes as indicated:
--$480.9 million class A-4 at 'AAAsf'; Outlook Stable;
--$1.12 billion class A-4A at 'AAAsf'; Outlook Stable;
--$167.4 million class A-4B at 'AAAsf'; Outlook Stable;
--$111.8 million class A-1A at 'AAAsf'; Outlook Stable;
--$300.1 million class A-J at 'BBsf'; Outlook Negative;
--$65 million class B at 'Bsf'; Outlook Negative;
--$35 million class C at 'CCCsf'; RE 50%;
--$75 million class D at 'CCsf'; RE 0%;
--$40 million class E at 'Csf'; RE 0%;
--$55 million class F at 'Csf'; RE 0%;
--$45 million class G at 'Csf'; RE 0%;
--$40 million class H at 'Csf'; RE 0%;
--$19.2 million class J at 'Dsf'; RE 0%;
--$0 class K at 'Dsf'; RE 0%;
--$0 class L at 'Dsf'; RE 0%;
--$0 class M at 'Dsf'; RE 0%;
--$0 class N at 'Dsf'; RE 0%;
--$0 class O at 'Dsf'; RE 0%.
Class P is not rated by Fitch. Classes A-1, A-1P, A-DP, A-2, A-3, A-ABA,
and A-ABB have paid in full. The ratings on the interest-only classes
X-P and X-C were already previously withdrawn.
Additional information on Fitch's criteria for analyzing U.S. CMBS
transactions is available in the Dec. 11, 2013 report, 'U.S. Fixed-Rate
Multiborrower CMBS Surveillance and Re-REMIC Criteria', which is
available at 'www.fitchratings.com'
under the following headers:
Structured Finance >> CMBS >> Criteria Reports
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC
Criteria' (Dec. 11, 2013).
Applicable Criteria and Related Research:
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
Global Structured Finance Rating Criteria
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PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS
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OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES
AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF
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RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY
CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH
Fitch Ratings, Inc.
Fitch Ratings, Inc.
New York, NY 10004
Source: Fitch Ratings