Fitch Takes Various Actions on CGCMT 2015-GC29 and GSMS 2015-GC32

Fitch Ratings has downgraded four and affirmed nine classes of Citigroup Commercial Mortgage Trust series 2015-GC29 commercial mortgage pass-through certificates (CGCMT 2015-GC29).

Following their downgrades, Fitch has assigned Negative Rating Outlooks on two classes. The Rating Outlooks for two of the affirmed classes were revised to Negative from Stable.

Fitch has also affirmed 13 classes of GS Mortgage Securities Trust 2015-GC32 commercial mortgage pass-through certificates (GSMS 2015-GC32). Fitch has also revised the Outlook to Negative from Stable on four of the affirmed classes.

RATING ACTIONS

Entity / Debt

Rating

Prior

CGCMT 2015-GC29

A-3 17323VAY1

LT

AAAsf

Affirmed

AAAsf

A-4 17323VAZ8

LT

AAAsf

Affirmed

AAAsf

A-AB 17323VBB0

LT

AAAsf

Affirmed

AAAsf

A-S 17323VBC8

LT

AAAsf

Affirmed

AAAsf

B 17323VBD6

LT

AA-sf

Affirmed

AA-sf

C 17323VBE4

LT

A-sf

Affirmed

A-sf

D 17323VAA3

LT

B+sf

Downgrade

BB+sf

E 17323VAC9

LT

CCCsf

Downgrade

B+sf

F 17323VAE5

LT

CCsf

Downgrade

B-sf

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VIEW ADDITIONAL RATING DETAILS

KEY RATING DRIVERS

Increased 'Bsf' Loss Expectations: The deal-level 'Bsf' rating case loss has increased since Fitch's prior rating action to 8.8% in CGCMT 2015-GC29 and 4.6% in GSMS 2015-GC32. The CGCMT 2015-GC29 transaction has five Fitch Loans of Concern (FLOCs; 26.2% of the pool), including one loan (2.2%) in special servicing. The GSMS 2015-GC32 transaction has nine FLOCs (16.2%), with no loans currently in special servicing.

CGCMT 2015-GC29: The downgrades on classes D, X-D, E and F reflect higher pool loss expectations since Fitch's prior rating action, driven primarily by further performance decline and refinance concerns on the office FLOCs, including Selig Office Portfolio (14.2%), Papago Arroyo (3.1%) and specially serviced 400 Plaza Drive (2.2%) loans. The Negative Rating Outlook on classes C, PEZ, D and X-D reflect their reliance on FLOCs to repay where downgrades are possible with continued occupancy and cashflow deterioration, lack of performance stabilization and/or a prolonged workout of the FLOCs that default at or prior to maturity.

GSMS 2015-GC32: The affirmations reflect the generally stable pool performance since Fitch's prior rating action. The Rating Outlook revisions for classes D, X-D, E and F to Negative from Stable reflects the higher pool loss expectations since the prior rating action, which were offset by increased credit enhancement (CE) from continued amortization, as well as these classes' reliance on FLOCs to repay, including Hilton Garden Inn Pittsburgh/Southpointe (3.4%), Selig Office Portfolio (3.1%), Shops at 69th Street (1.2%), Four Points Sheraton Columbus Airport (0.9%) and Midwest Retail Portfolio (0.8%).

Largest Contributors to Loss: The largest contributor to overall loss expectations in CGCMT 2015-GC29 and the second largest contributor in GSMS 2015-GC32 is the Selig Office Portfolio loan, secured by a 1,631,457-sf office portfolio consisting of nine buildings in Seattle, WA. The portfolio consists of older inventory built between 1971 and 1986. The loan has an upcoming loan maturity in April 2025.

The largest tenants in the portfolio include Washington State Ferries (5.4% of NRA; lease expiry in August 2025), ZipWhip (4.6%; October 2029) and City of Seattle (2.3%; October 2034).

As of September 2023, the occupancy for the portfolio was 77%, down from 79% at YE 2022, 84% at YE 2021, 93% at YE 2020 and 95% at YE 2019. The rent roll is granular, with no individual tenant representing more than 1.6% of the portfolio NRA rolling in 2024 and 5.4% in 2025. The servicer-reported NOI DSCR as of Q3 2023 was 2.25x, compared to 2.22x at YE 2022, 2.40x at YE 2021, 2.64x at YE 2020 and 2.35x at YE 2019.

The Seattle CBD submarket has seen a deterioration of performance fundamentals over the past few years. As of 1Q24 per CoStar, the office submarket asking rent was $37.79 psf and the vacancy rate was 24.3%, compared with the subject property at $33.02 psf and 23%, respectively, as of September 2023.

Fitch's 'Bsf' rating case loss of 22.8% (prior to concentration add-ons) reflects a 10% cap rate, 10% stress to the YE 2022 NOI and factors a 100% probability of default due to the declining portfolio occupancy, weak market fundamentals and expected refinance concerns.

The second largest contributor to overall loss expectations in CGCMT 2015-GC29 is the Parkchester Commercial loan, secured by a 541,232-sf, mixed-use retail/office property in the Bronx. The largest tenant, Macy's (31.5% of NRA), recently extended its lease by five years until March 2029.

Property-level NOI has been declining since issuance mainly due to increases in expenses, along with the decline in occupancy over the past year. The servicer-reported NOI DSCR as of Q3 2023 was 0.65x, compared to 1.20x at YE 2022, 0.84x at YE 2021, 1.31x at YE 2020 and 1.14x at YE 2019. Occupancy per the September 2023 rent roll was 76.7%, down from 90% at September 2022, 89% at December 2021, 93% at December 2020 and 93% at issuance.

Fitch's 'Bsf' rating case loss of 28.7% (prior to concentration add-ons) reflects a 9% cap rate, 7.5% stress to the annualized Q3 2023 NOI, and factors a 100% probability of default due to the weak performance, low DSCR and heightened maturity default risk.

The third largest contributor to overall loss expectations in CGCMT 2015-GC29 is the Papago Arroyo loan, secured by a 279,504-sf suburban office property in Tempe, AZ. The former largest tenant, Sonora Quest Laboratories (55% of NRA), vacated the majority of their space in July 2020 prior to lease expiration in December 2023. Sonora Quest Laboratories provided a lease termination fee of $976,000 after exercising its early termination option. Additionally, the previous borrower provided a letter of credit of $1 million to prevent a trigger event from occurring.

Occupancy as of December 2023 had fallen further to 29.1% from 35% at September 2022, 47% at June 2021, 46% at December 2020 and 96% at December 2019. The servicer-reported NOI DSCR remains low as of Q3 2023 at 0.10x, down from 0.40x at YE 2022, 0.66x at YE 2021, 1.60x at YE 2020 and 2.56x at YE 2019.

Fitch's 'Bsf' rating case loss of 52.4% (prior to concentration add-ons) reflects a 10.50% cap rate, 10% stress to the YE 2022 NOI, and factors a 100% probability of default due to the poor property performance, low DSCR and heightened maturity default risk.

Specially Serviced Loan: The specially serviced loan in CGCMT 2015-GC29 is 400 Plaza Drive, secured by a 258,459-sf suburban office property in Secaucus, NJ. The loan transferred to special servicing in January 2024 due to payment default after losing its largest tenant.

Occupancy at the subject has been depressed since Hartz Mountain vacated part of its space (approximately 22% of NRA) upon its 2021 lease expiration. The tenant remained at the property until YE 2023, when they vacated the remainder of the space (20.7% of NRA). Per the September 2023 rent roll, the property was 55% occupied; however, after factoring Hartz Mountain vacating the remainder of their space (21% of NRA) at the end of 2023, current occupancy is estimated to be approximately 34%. Upcoming rollover at the property includes 13.3% of the NRA in 2024 and 2.3% in 2025. The servicer-reported NOI DSCR was 1.37x as of September 2023, compared to 1.63x at YE 2022, 1.35x at YE 2021 and 3.06x at YE 2020.

Fitch's 'Bsf' rating case loss of 29.4% (prior to concentration add-ons) reflects a 10% cap rate, 40% stress to the YE 2022 NOI, and factors a 100% probability of default due to the loan's specially serviced status, low occupancy from loss of a major tenant and anticipated refinance concerns.

The largest contributor to overall loss expectations in GSMS 2015-GC32 is the Hilton Garden Inn Pittsburgh/Southpointe loan (3.4%), which is secured by a 175-key limited-service hotel in Canonsburg, PA. The loan previously transferred to special servicing in June 2020. A loan modification closed in July 2021, and the loan was subsequently returned to the master servicer.

The servicer-reported occupancy for the TTM October 2023 period was 42.9%, compared to 56% at September 2022, 34% at July 2020, and 59% at YE 2019. The servicer-reported NOI DSCR for the TTM October 2023 period was 0.66x, compared to 1.26x at July 2022, 2.63x at YE 2021, 0.59x at YE 2020 and 1.31x at YE 2019. Property-level NOI fell 43.4% between 2022 to 2023, primarily driven by an increase in operating expenses and a slight decline in revenue.

Fitch's 'Bsf' rating case loss of 34.3% (prior to concentration add-ons) reflects a 11.5% cap rate, 15% stress to the TTM October 2023 NOI, and factors a 100% probability of default due to the loan's heightened maturity default risk.

The third largest contributor to overall loss expectations in GSMS 2015-GC32 is the Shops at 69th Street loan, secured by a 128,149-sf mixed use property located in Upper Darby, PA. Major tenants include Delaware County Services (41.9% of NRA; lease expiry in July 2025), Fashion Gallery (15.5%; January 2027) and Old Navy (9.5%; August 2027). The largest tenant's lease expiration is co-terminous with the loan's July 2025 maturity.

Per the December 2023 rent roll, the property was 71.3% occupied, compared to 75% at YE 2022 and YE 2021, and 100% at YE 2020. Occupancy declined after Harris School of Business (previously 25% of the NRA) vacated. The servicer-reported NOI DSCR remains low at 0.68x as of Q3 2023, compared to 0.82x at YE 2022, 0.94x at YE 2021 and 1.10x at YE 2020.

Fitch's 'Bsf' rating case of 32.7% (prior to concentration add-ons) reflects a 9% cap rate, 20% stress to the YE 2022 NOI, and factors a 100% probability of default due to the lower occupancy and loan's heightened maturity default risk.

Increased CE: As of the February 2024 distribution date, the pool's aggregate balance for CGCMT 2015-GC29 has been reduced by 21.4% to $879.5 million from $1.1 billion at issuance. Twenty-five loans (28.8% of pool) have been defeased. Four loans (39%) are full-term interest-only (IO), and the remaining 61% of the pool is amortizing. Scheduled loan maturities include four loans (2%) in 2024 and 74 loans (98%) in 2025.

As of the February 2024 distribution date, the pool's aggregate balance for GSMS 2015-GC32 has been reduced by 20.1% to $801.6 million from $1.0 billion at issuance. Thirteen loans (26.2% of pool) have been defeased. Five loans (7%) are full-term IO, and the remaining 93% of the pool is amortizing. All loans are scheduled to mature in 2025.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

Downgrades to classes rated 'AAAsf' are not expected due to the position in the capital structure and expected continued amortization and loan repayments, but may occur if deal-level losses increase significantly and/or interest shortfalls occur.

Downgrades to classes rated in the 'AAsf' and 'Asf' categories could occur if deal-level losses increase significantly from outsized losses on larger FLOCs and/or more loans than expected experience performance deterioration and/or default at or prior to maturity.

Downgrades to in the 'BBBsf', 'BBsf' and 'Bsf' categories are possible with higher than expected losses from continued underperformance of the FLOCs and/or with greater certainty of losses on the specially serviced loans and/or FLOCs.

Downgrades to 'CCCsf' and 'CCsf' rated classes would occur should additional loans transfer to special servicing and/or default, as losses be realized or become more certain.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

Upgrades to classes rated in the 'AAsf' and 'Asf' category may be possible with significantly increased CE, coupled with stable-to-improved pool-level loss expectations and improved performance on the FLOCs.

Upgrades to the 'BBBsf' and 'BBsf' category rated classes would be limited based on sensitivity to concentrations or the potential for future concentration. Classes would not be upgraded above 'AA+sf' if there is likelihood for interest shortfalls.

Upgrades to 'BBsf' and 'Bsf' category rated classes could occur only if the performance of the remaining pool is stable, recoveries on the FLOCs are better than expected, and there is sufficient CE to the classes.

Upgrades to 'CCCsf' and 'CCsf' are not likely, but may be possible with better than expected recoveries on specially serviced loans and/or significantly higher values on FLOCs.

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

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.

Additional information is available on www.fitchratings.com