The attractions of Grande Canal Shoppes, a luxury shopping center property in Las Vegas, are not just bringing in the tourists. It is the 14th-largest loan in the GS Mortgage Securities Trust 2019-GSA1, a Goldman Sachs deal, with an investment grade rating of A-, and has a subordinate B-level loan held outside the trust.
The features of the Canal Shoppes loan is one of several positive credit considerations on the $864.2 million CMBS conduit transaction being prepared for the market, according to the Kroll Bond Rating Agency. The deal has 13 certificates paying principal and interest, three interest-only certificates, and one retained eligible vertical interest.
The deal is expected to close on November 11, according to FitchRatings.
The GS Mortgage Securities Trust consists of 49 loans, which themselves are backed by 84 properties. The pool’s underlying loans are highly diversified along several lines.
Overall, the pool has a 103.5% weighted average KLTV within the trust, according to Kroll Bond Rating Agency. KBRA noted that this conduit’s pool has a more uniform distribution of KLTV, which distinguishes it from many CMBS conduit transactions that are less balanced, due to a low exposure to low-leverage loans.
Location matters in commercial real estate, and this conduit has diversified its pool with properties in primary and tertiary markets, while the ratio of properties in primary markets is 56.7%. KBRA examined conduits that it had rated going back to 2013, and found that the primary market exposure in GS Mortgage Securities Trust 2019-GSA1 was higher than the average 48.7% for the comparable set.
Further, the conduit had an exposure to tertiary markets of 9.4%, below the average of 14.5% in the same comparable set of deals spanning back six years.
The conduit transaction has a very even mix of property types, and the top three types are retail, with 26.5%; office, 20.7%; and multifamily, with 19.1%. Very few lodging loans are in the underlying portfolio, according to KBRA, only about 13.9%. Because lodging assets tend to have more volatile cash flows than other property types, KBRA says it tends to view lodging properties unfavorably.
Eight of the certificates are rated ‘AAAsf’ by KBRA; including a $679.5 million, X-A tranche and a $76.7 X-B tranche. Fitch Ratings also assigned the ‘X-A’ tranche a ‘AAA’ rating.
The deal has exposure to portfolio loans, which are mortgages secured by multiple properties, according to KBRA. Portfolio loans help the borrower to keep the loan current, should one or more properties begin to underperform. In the GS Mortgage Securities transaction, eight portfolio loans make up 24.1% of the underlying pool.
Despite the level of diversification and representation of primary markets, KBRA cited several negative credit characteristics. Two loans are secured by properties leased to a sponsor affiliate entity, which are riskier than those leased to an array of unrelated tenants. For instance, one property, on 709 Science Drive, a warehouse facility that is fully leased to one sponsor affiliated tenant, according to KBRA.
