Fitch Affirms GSMSC 2007-GG10

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed 19 classes of GS Mortgage Securities Trust series 2007-GG10 (GSMSC) commercial mortgage pass-through certificates series 2007-GG10. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

Stable Loss Expectations: The affirmations reflect the transaction's stable performance since Fitch's last review. Fitch modeled losses of 16.8% of the remaining pool; expected losses on the original pool balance total 22.1%, including $872 million (11.5% of the original pool balance) in realized losses to date. Fitch has designated 52 loans (42%) as Fitch Loans of Concern, which includes 13 specially serviced assets (8%).

Many Highly Leveraged Performing Loans: The pool contains many loans originated at the previous market peak which may not be able to refinance at maturity. While many of these loans have institutional quality borrowers, many have failed to fully recover from stressed levels seen during the downturn. Additionally, the remaining pool contains 22 loans totaling $581 million which were modified at some point. Fifteen of these modified loans were split into A/B notes structures where Fitch deems the B-notes to have very slim prospects of recovery. Six such modified loans (2% of the pool) have re-defaulted and are now back with the special servicer.

The largest contributor to expected losses is the Wells Fargo Tower loan (11%), which is secured by a 1,385,325-sf office tower located in the Los Angeles, CA, CBD. Significant lease roll occurred in 2013 when tenants occupying approximately 100,000-sf vacated the property, driving occupancy down to 85.8%. As of September 2016 occupancy had fallen further to 83%. NCF DSCR has consistently been below 1.0x since 2010. Upcoming rollover is 12% over the next year. The loan matures in April of 2017.

The next largest contributor to expected losses is the 400 Atlantic Street loan (5.3%), which is secured by a 527,424-sf office property, located in the Stamford, CT, CBD. The loan transferred to the special servicer in October 2014 when American Express (7% of NRA) vacated at lease expiration. The second largest tenant also vacated its space in December 2015. The largest tenant (51% of NRA) has vacated the property but continues to pay rent. The tenant has indicated that it will not renew its lease which expires in September 2018. A sub-tenant occupies approximately 65% of that space. The borrower and special servicer were not able to agree on terms for a modification and the loan transferred back to the master servicer in June 2016. As of September 2016 the property was 73% occupied.

The third largest contributor to expected losses is the TIAA Rexcorp New Jersey Loan. The interest-only loan is collateralized by a portfolio of six office buildings totaling 1,042,000 sf, located in suburban New Jersey. The loan transferred to the special servicer in October 2016 due to imminent maturity default. Issuance projected cashflows for the portfolio were never achieved and occupancy has suffered in recent years as several large tenants vacated. The servicer is reviewing the file to determine a workout strategy.

As of the December 2016 distribution date, the pool's aggregate principal balance has been reduced by 35.6% to $4.75 billion from $7.56 billion at issuance. Per the servicer reporting, 19 loans (16.4% of the pool) are defeased. Interest shortfalls are currently affecting classes A-J through C and J through S. Nearly all (95.5% of the pool) of the loans mature within the next six months.

RATING SENSITIVITIES

The Rating Outlooks on classes A-4 and A-1A remain Negative due to the high leverage of the pool overall, many large loans that struggle with performance issues and 95% of the pool that matures in the next six months. These classes could be downgraded if loans fail to repay at maturity. Downgrades to distressed classes will occur as losses make their way up the capital stack, or if additional loans become specially serviced. Upgrades are unlikely absent significant paydown or defeasance.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10

No third party due diligence was provided or reviewed in relation to this rating action.

Fitch affirms the following classes:

--$3 billion class A-4 at 'Asf'; Outlook Negative;

--$318.7 million class A-1A at 'Asf'; Outlook Negative;

--$756.3 million class A-M at 'CCCsf'; RE 50%;

--$519.9 million class A-J at 'Csf'; RE 0%;

--$75.6 million class B at 'Csf'; RE 0%;

--$45 million class C at 'Dsf'; RE 0%;

The class A-1, A-2, A-3 and A-AB certificates have paid in full. Classes D through Q have been reduced to zero balance by realized losses and are affirmed at 'Dsf', RE 0%. Fitch does not rate the class S certificates. Fitch previously withdrew the rating on the interest-only class X certificates.

Fitch will release more in depth transaction commentary in an upcoming report titled 'GS Mortgage Securities Corporation II, series 2007-GG10 Focus Report'.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)https://www.fitchratings.com/site/re/886006

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)https://www.fitchratings.com/site/re/883130

North America and Asia-Pacific Multiborrower CMBS Surveillance Criteria (pub. 01 Dec 2016)https://www.fitchratings.com/site/re/891159

Additional Disclosures

Dodd-Frank Rating Information Disclosure Formhttps://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1016582

Solicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1016582

Endorsement Policyhttps://www.fitchratings.com/regulatory

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Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third-party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed.

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View source version on businesswire.com: http://www.businesswire.com/news/home/20161215006318/en/

Fitch Ratings
Primary Analyst:
R. Brook Sutherland, +1-312-606-2346
Senior Director
Fitch Ratings, Inc.
70 West Madison
Chicago, IL 60602
or
Committee Chairperson:
Mary MacNeill, +1-212-908-0785
Managing Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
New York
[email protected]

Source: Fitch Ratings

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