Fitch Affirms GSMSC II 2006-GG8
KEY RATING DRIVERS
The affirmations reflect sufficient credit enhancement on the non-distressed classes based on Fitch's modeled losses of 11% of the remaining pool. Expected losses on the original pool balance total 14.3%, including $346.1 million (8.2% of the original pool balance) in realized losses to date. Fitch has designated 52 loans (45.4%) as Fitch Loans of Concern, which includes three specially serviced assets (7.4%).
As of the January 2016 distribution date, the pool's aggregate principal balance has been reduced by 43.6% to $2.39 billion from $4.24 billion at issuance. Per the servicer reporting, nine loans (10.6% of the pool) are defeased, including the largest loan, 222 South Riverside Plaza. Interest shortfalls are currently affecting classes D through S. All of the non-specially serviced loans (92.6% of the pool) are scheduled to mature between June 2016 and November 2016.
The largest contributor to expected losses is the real estate owned (REO) Ariel Preferred Portfolio (2.2% of the pool), the remaining asset is a retail outlet located in Medford, MN. Five of the original six properties were previously sold. The outlet portfolio had transferred to special servicing in June 2009 for imminent default.
The second largest contributor to modeled losses is The Alhambra loan (5.4% of the pool), which is secured by an office park containing 22 buildings totaling 846,541 square feet (sf) located in Alhambra, CA. The servicer-reported occupancy is approximately 73% with the largest tenant on a month to month lease. The loan is scheduled to mature in July 2016.
The third largest contributor to modeled losses is the specially serviced Fair Lakes Office Park loan (4.9% of the pool). The pari passu loan is secured by an approximately 1.25 million sf, nine-building office property located in Fairfax, VA near I-66 and the Fairfax County Parkway. The reported occupancy as of March 2015 was 82% (down from 99% at issuance). A large tenant representing 21% of the net rentable area (NRA) vacated two buildings in 2015. The loan is scheduled to mature in August 2016.
RATING SENSITIVITIES
The Positive Outlook on class A-M reflects the possibility of a future upgrade if the transaction de-levers as loans payoff at their scheduled maturity. Conversely, if maturity defaults and transfers to special servicing increase, the likelihood of an upgrade is low in the near term. Fitch will monitor the transaction as loan maturity dates approach. Downgrades to the distressed classes are likely if loans default at maturity and loss expectations increase.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch affirms the following class with a revised Rating Outlook:
--$424.3 million class A-M at 'Asf'; Outlook to Positive from Stable.
Fitch affirms the following ratings as indicated:
--$1.34 billion class A-4 at 'AAAsf'; Outlook Stable;
--$126.7 million class A-1A at 'AAAsf'; Outlook Stable;
--$302.3 million class A-J at 'CCCsf'; RE 85%.
--$26.5 million class B at 'CCCsf'; RE 0%;
--$53 million class C at 'CCsf'; RE 0%;
--$37.1 million class D at 'Csf'; RE 0%;
--$37.1 million class E at 'Csf'; RE 0%;
--$42.4 million class F at 'Csf'; RE 0%;
--$3.9 million class G at 'Dsf'; RE 0%.
Classes H, J, K, L, M, N, O, P and Q are fully depleted and are affirmed at 'Dsf', RE 0% due to realized losses.
The class A-1, A-2, A-3 and A-AB certificates have paid in full. Fitch does not rate the fully depleted class S certificates. Fitch previously withdrew the rating on the interest-only class X certificates.
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