Research: Rating Action: Moody’s assigns definitive ratings to four CMBS classes of GS Mortgage Securities Corporation Trust 2023-FUN

$332.5 million of structured securities affected

New York, March 28, 2023 — Moody’s Investors Service, (“Moody’s”) has assigned definitive ratings to four classes of CMBS securities, issued by GS Mortgage Securities Corporation Trust 2023-FUN, Commercial Mortgage Pass-Through Certificates, Series 2023-FUN:

Cl. A, Definitive Rating Assigned Aaa (sf)

Cl. B, Definitive Rating Assigned Aa3 (sf)

Cl. C, Definitive Rating Assigned A3 (sf)

Cl. D, Definitive Rating Assigned Baa2 (sf)

RATINGS RATIONALE

The certificates are collateralized by a single loan backed by a first lien commercial mortgage on the fee simple interest in Kalahari Resorts Pocono Manor, a waterpark resort and convention hospitality property in Pocono Manor, PA. Our ratings are based on the credit quality of the loans and the strength of the securitization structure.

Moody’s approach to rating this transaction involved the application of our Large Loan and Single Asset/Single Borrower Commercial Mortgage-Backed Securitization Methodology. The rating approach for securities backed by a single loan compares the credit risk inherent in the underlying collateral with the credit protection offered by the structure. The structure’s credit enhancement is quantified by the maximum deterioration in property value that the securities are able to withstand under various stress scenarios without causing an increase in the expected loss for various rating levels. In assigning single borrower ratings, we also consider a range of qualitative issues as well as the transaction’s structural and legal aspects.

Kalahari Resorts Pocono Manor is a 977-key, 1,469,615 SF waterpark hotel and resort situated on an approximately 151-acre site in Pocono Manor, PA. The site is located within approximately 100-250-mile drive of major metros such as New York City, Philadelphia, and Washington, D.C. The resort was developed in phases between 2015 and 2019 and features one of the largest indoor waterparks in the United States at approximately 220,000 SF, an outdoor waterpark sized at approximately 90,000 SF, 16 food and beverage outlets, an interactive arcade and indoor activities area, an outdoor adventure park, a convention center which includes 91,500 SF of indoor meeting space, a spa, four retail areas and a fitness center. Additionally, the property’s 977 guestroom offering is expansive, as it includes standard guestrooms, 1-, 2-, 3- and 5-bedroom suites.

The credit risk of loans is determined primarily by two factors: 1) Moody’s assessment of the probability of default, which is largely driven by each loan’s DSCR, and 2) Moody’s assessment of the severity of loss upon a default, which is largely driven by each loan’s loan-to-value ratio, referred to as the Moody’s LTV or MLTV.  As described in the CMBS methodology used to rate this transaction, we make various adjustments to the MLTV. We adjust the MLTV for each loan using a value that reflects capitalization (cap) rates that are between our sustainable cap rates and market cap rates. We also use an adjusted loan balance that reflects each loan’s amortization profile.

The Moody’s first mortgage actual DSCR is 2.09X and Moody’s first mortgage actual stressed DSCR is 1.71X. Moody’s DSCR is based on our stabilized net cash flow.

The loan first mortgage balance of $350,000,000 represents a Moody’s LTV of 74.8%. Moody’s LTV ratio is based on our Moody’s value. We did not adjust Moody’s value to reflect the current interest rate environment as part of our analysis for this transaction.

Moody’s also grades properties on a scale of 0 to 5 (best to worst) and considers those grades when assessing the likelihood of debt payment. The factors considered include property age, quality of construction, location, market, and tenancy. The property’s quality grade is 3.00.

Notable strengths of the transaction include the asset quality, capital investment, location, low MLTV, and sponsorship.

Notable concerns of the transaction include the effects of the coronavirus pandemic, new supply and competition, performance volatility inherent within the hotel and waterpark sector, full-term interest-only floating-rate mortgage loan profile, and credit-negative legal features.

The principal methodology used in these ratings was “Large Loan and Single Asset/Single Borrower Commercial Mortgage-Backed Securitizations Methodology” published in July 2022 and available at https://ratings.moodys.com/api/rmc-documents/391055. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.

Moody’s approach for single borrower and large loan multi-borrower transactions evaluates credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from our Moody’s loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, and property type. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations.

Factors that would lead to an upgrade or downgrade of the ratings:

The performance expectations for a given variable indicate Moody’s forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range may indicate that the collateral’s credit quality is stronger or weaker than Moody’s had previously anticipated. Factors that may cause an upgrade of the ratings include significant loan pay downs or amortization, an increase in the pool’s share of defeasance or overall improved pool performance. Factors that may cause a downgrade of the ratings include a decline in the overall performance of the pool, loan concentration, increased expected losses from specially serviced and troubled loans or interest shortfalls.

REGULATORY DISCLOSURES

For further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.

Further information on the representations and warranties and enforcement mechanisms available to investors are available on https://ratings.moodys.com/documents/PBS_1361884.

The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody’s estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.

Moody’s quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody’s weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https://ratings.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on https://ratings.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on https://ratings.moodys.com.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.

Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.

Blair Coulson
VP – Senior Credit Officer
Structured Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Gregory Ingaglio
Vice President – Senior Analyst
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653