Fitch Ratings has assigned the following ratings and Rating Outlooks for
GS Mortgage Securities Trust (GSMS) 2016-GS3 Commercial Mortgage
Pass-Through Certificates, Series 2016-GS3.
-- $28,475,000 class A-1 'AAAsf'; Outlook Stable;
-- $77,052,000 class A-2 'AAAsf'; Outlook Stable;
-- $265,000,000 class A-3 'AAAsf'; Outlook Stable;
-- $320,243,000 class A-4 'AAAsf'; Outlook Stable;
-- $57,066,000 class A-AB 'AAAsf'; Outlook Stable;
-- $841,316,000b class X-A 'AAAsf'; Outlook Stable;
-- $53,417,000b class X-B 'AA-sf'; Outlook Stable;
-- $93,480,000c class A-S 'AAAsf'; Outlook Stable;
-- $53,417,000c class B 'AA-sf'; Outlook Stable;
-- $192,301,000c class PEZ 'A-sf'; Outlook Stable;
-- $45,404,000c class C 'A-sf'; Outlook Stable;
-- $53,417,000a class D 'BBB-sf'; Outlook Stable;
-- $53,417,000ab class X-D 'BBB-sf'; Outlook Stable;
-- $24,038,000a class E 'BB-sf'; Outlook Stable;
-- $10,683,000a class F 'B-sf'; Outlook Stable;
-- $40,063,502a class G 'NR'.
(a) Privately placed and pursuant to Rule 144A.
(b) Notional amount and interest only.
(c) Class A-S, B and C certificates may be exchanged for class PEZ
certificates, and class PEZ certificates may be exchanged for class A-S,
B and C certificates.
Since Fitch published its expected ratings on Sept. 14, 2016, the
notional balance of the interest-only class X-B changed from $98,821,000
to $53,417,000. The rating for the class changed from 'A-sf' to 'AA-sf'.
These ratings are based on information provided by the issuer as of
Sept. 13, 2016. Fitch does not rate the $40,063,502 class G.
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 34 loans secured by 152 commercial
properties having an aggregate principal balance of approximately $1.07
billion as of the cut-off date. The loans were contributed to the trust
by Goldman Sachs Mortgage Company.
Fitch reviewed a comprehensive sample of the transaction's collateral,
including site inspections on 70.6% of the properties by balance and
cash flow analysis of 92.9% of the pool.
The transaction has a Fitch stressed debt service coverage ratio (DSCR)
of 1.30x, a Fitch stressed loan-to-value (LTV) of 97.2%, and a Fitch
debt yield of 9.9%. Fitch's aggregate net cash flow represents a
variance of 11.4% to issuer cash flows.
KEY RATING DRIVERS
Lower Fitch Leverage: The Fitch stressed DSCR on the trust-specific debt
is 1.30x, higher than the 2015 and YTD 2016 averages of 1.18x and 1.18x,
respectively. The Fitch stressed LTV ratio on the trust-specific debt is
97.2%, lower than the 2015 and YTD 2016 averages of 109.3% and 106.5%,
respectively, for the other Fitch-rated deals.
Highly Concentrated Pool: The largest 10 loans in the transaction
comprise 62.1% 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
55.3%, respectively. The pool's concentration results in a loan
concentration index (LCI) of 486, which is higher than the 2015 average
of 367 and 2016 YTD average of 428.
Credit Opinion Loans: Three loans in the pool, representing 21.5% of the
total pool balance, received investment-grade credit opinions. The
largest loan in the pool, 10 Hudson Yards (8.2% of the pool), received
an investment-grade credit opinion of 'AAAsf' on a fusion basis. The
second largest loan, 540 West Madison (8.1% of the pool), received an
investment-grade opinion of 'A+sf' on a fusion basis. Veritas
Multifamily Pool 1 (5.2% of the pool) received an investment-grade
credit opinion of 'AAAsf' on a fusion basis.
For this transaction, Fitch's net cash flow (NCF) was 5.8% below the
most recent year's net operating income (NOI); for properties for which
a full-year NOI was provided, excluding properties that were stabilizing
during this period. Unanticipated further declines in property-level NCF
could result in higher defaults and loss severities on defaulted loans
and in potential rating actions on the certificates.
Fitch evaluated the sensitivity of the ratings assigned to GSMS 2016-GS3
certificates and found that the transaction displays average
sensitivities 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 'BBBsf' could result. The presale report
includes a detailed explanation of additional stresses and sensitivities
on page 11.
DUE DILIGENCE USAGE
Fitch was provided with due diligence information from Ernst & Young LL.
The due diligence 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 our analysis. A copy of the ABS Due Diligence Form-15E
received by Fitch in connection with this transaction may be obtained
through the link contained on the bottom of the related rating action
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage
Transactions (pub. 18 Aug 2016)
Criteria for Analyzing Multiborrower U.S. and Canadian Commercial
Mortgage Transactions (pub. 01 Jul 2016)
Criteria for Rating Caps and Limitations in Global Structured Finance
Transactions (pub. 16 Jun 2016)
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
Rating Criteria for Structured Finance Servicers (pub. 01 Jul 2016)
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)
Dodd-Frank Rating Information Disclosure Form
ABS Due Diligence Form 15E 1
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