Fitch Ratings has assigned the following ratings and Rating Outlooks for
GS Mortgage Securities Trust (GSMS) 2016-GS2 Commercial Mortgage
Pass-Through Certificates, Series 2016-GS2.
--$11,733,000 class A-1 'AAAsf'; Outlook Stable;
--$137,578,000 class A-2 'AAAsf'; Outlook Stable;
--$165,000,000 class A-3 'AAAsf'; Outlook Stable;
--$187,977,000 class A-4 'AAAsf'; Outlook Stable;
--$23,162,000 class A-AB 'AAAsf'; Outlook Stable;
--$570,488,000b class X-A 'AAAsf'; Outlook Stable;
--$42,224,000b class X-B AA-sf; Outlook Stable;
--$45,038,000c class A-S 'AAAsf'; Outlook Stable;
--$42,224,000c class B 'AA-sf'; Outlook Stable;
--$122,918,000c class PEZ 'A-sf'; Outlook Stable;
--$35,656,000c class C 'A-sf'; Outlook Stable;
--$42,223,000a class D 'BBB?sf'; Outlook Stable;
--$42,223,000ab class X-D 'BBB?sf'; Outlook Stable;
--$20,643,000a class E 'BB?sf'; Outlook Stable;
--$7,506,000a class F 'B?sf'; Outlook Stable;
--$31,903,230a class G 'NR'.
a Privately placed and pursuant to rule 144A.
b Notional amount and interest only.
c The class A-S, class B, and class C certificates may be exchanged for
class PEZ certificates, and class PEZ certificates may be exchanged for
the class A-S, class B, and class C certificates.
The ratings are based on information provided by the issuer as of May 9,
2016. Fitch does not rate the $31,903,230 class G. The certificates
represent the beneficial ownership interest in the trust, primary assets
of which are 37 loans secured by 115 commercial properties having an
aggregate principal balance of approximately $750.6 million as of the
cutoff date. The loans were contributed to the trust by Goldman Sachs
Fitch reviewed a comprehensive sample of the transaction's collateral
including site inspections on 83.4% of the properties by balance and
asset summary reviews and cash flow analysis of 93.8% of the pool.
KEY RATING DRIVERS
Fitch Leverage: The Fitch stressed debt service coverage ratio (DSCR) on
the trust-specific debt is 1.24x, higher than the 2015 and YTD 2016
averages of 1.18x and 1.17x, respectively, for the other Fitch-rated
U.S. multiborrower deals. The Fitch stressed loan-to-value (LTV) ratio
on the trust-specific debt is 103.4%, lower than the 2015 and YTD 2016
averages of 109.3% and 107.9%, respectively, for the other Fitch-rated
Highly Concentrated Pool: The largest 10 loans in the transaction
compose 62.7% of the pool by balance. Compared to other Fitch-rated U.S.
multiborrower deals, the concentration in this transaction is higher
than the 2015 and YTD 2016 average concentrations of 49.3% and 54.8%,
respectively. The pool's concentration results in a loan concentration
index (LCI) of 539, which is higher than the 2015 average of 367 and
2016 YTD average of 415.
Credit Opinion Loan: One loan in the pool received shadow ratings. The
Veritas Multifamily Pool 1 (9.99% of the pool) received an
investment-grade rating of 'AAAsf' on a fusion basis and a 'AAAsf'
rating on a stand-alone basis.
Interest-Only Loans: 17 loans that make up 62.5% of the pool are full
interest-only. This is higher than the average of 23.3% for 2015 and
30.8% for YTD 2016 of the other Fitch-rated U.S. multiborrower deals. In
addition, 14 loans which comprised 23.3% of the pool are partial
interest-only; this share is lower than the average of 43.1% for 2015
and 41.1% for YTD 2016 of the other Fitch-rated U.S. multiborrower
deals. Overall, the pool is scheduled to pay down by 5.08%, compared
with the averages of 11.7% for 2015 and 9.9% YTD for 2016 for the other
Fitch-rated U.S. deals.
ADDITIONAL RATING DRIVERS
Sponsor Concentration: The top 10 sponsors comprise 75.7% of the pool,
including a single sponsor's 17.3% share. This results in a sponsor
concentration index (SCI) of 833, which is higher than the 2015 and YTD
2016 averages of 410 and 461, respectively, for other Fitch-rated
Mortgage Coupons: The weighted average (WA) mortgage coupon for this
pool of loans is 4.55%, well below historical averages. Fitch accounted
for increased refinance risk in a higher interest rate environment by
analyzing sensitivity to increased interest rates in conjunction with
Fitch's stressed refinance rates, which were 9.07% on a WA basis.
For this transaction, Fitch's NCF was 6.4% below the most recent year's
NOI (for properties for which a full year NOI was provided, excluding
properties that were stabilizing during this period). The following
rating sensitivities describe how the ratings would react to further NCF
declines below Fitch's NCF. The implied rating sensitivities are only
indicative of some of the potential outcomes and do not consider other
risk factors to which the transaction is exposed. Stressing additional
risk factors may result in different outcomes. Furthermore, the implied
ratings, after the further NCF stresses are applied, are more akin to
what the ratings would be at deal issuance had those further stressed
NCFs been in place at that time.
Fitch evaluated the sensitivity of the ratings assigned to GSMS 2016-GS2
certificates and found that the transaction displays average sensitivity
to further declines in NCF. In a scenario in which NCF declined a
further 20% from Fitch's NCF, a downgrade of the junior 'AAAsf'
certificates to 'A-sf' could result. In a more severe scenario, in which
NCF declined a further 30% from Fitch's NCF, a downgrade of the junior
'AAAsf' certificates to 'BBB-sf' could result. The presale report
includes a detailed explanation of additional stresses and sensitivities
on pages 10.
DUE DILIGENCE USAGE
Fitch was provided with third party due diligence information from Ernst
& Young LLP. The third-party due diligence information was provided on
Form ABS Due Diligence-15E and focused on a comparison and
re-computation of certain characteristics with respect to each of the
mortgage loans. Fitch considered this information in its analysis and
the findings did not have an impact on the analysis.
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage
Transactions (pub. 27 Aug 2015)
Criteria for Analyzing Multiborrower U.S. and Canadian Commercial
Mortgage Transactions (pub. 03 Mar 2016)
Criteria for Rating Caps and Limitations in Global Structured Finance
Transactions (pub. 28 May 2014)
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
Rating Criteria for Structured Finance Servicers (pub. 23 Apr 2015)
Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)
U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S.
Re-REMIC Criteria (pub. 13 Nov 2015)
GS Mortgage Securities Trust 2016-GS2 - Appendix
Dodd-Frank Rating Information Disclosure Form
ABS Due Diligence Form 15E 1
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CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH
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