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GS Mortgage Securities Trust 2014-GC24 -- Moody's affirms eight and downgrades two classes of GSMS 2014-GC24

Rating Action: Moody's affirms eight and downgrades two classes of GSMS 2014-GC24

Global Credit Research - 10 Aug 2020

Approximately $812 million of structured securities affected

New York, August 10, 2020 -- Moody's Investors Service, ("Moody's") has affirmed the ratings on eight classes and downgraded the ratings on two classes in GS Mortgage Securities Trust 2014-GC24 ("GSMS 2014-GC24"), Commercial Mortgage Pass-Through Certificates, Series 2014-GC24 as follows:

Cl. A-3, Affirmed Aaa (sf); previously on Jun 12, 2019 Affirmed Aaa (sf)

Cl. A-4, Affirmed Aaa (sf); previously on Jun 12, 2019 Affirmed Aaa (sf)

Cl. A-5, Affirmed Aaa (sf); previously on Jun 12, 2019 Affirmed Aaa (sf)

Cl. A-AB, Affirmed Aaa (sf); previously on Jun 12, 2019 Affirmed Aaa (sf)

Cl. A-S, Affirmed Aaa (sf); previously on Jun 12, 2019 Affirmed Aaa (sf)

Cl. B, Affirmed Aa3 (sf); previously on Jun 12, 2019 Affirmed Aa3 (sf)

Cl. C, Downgraded to Baa2 (sf); previously on Jun 12, 2019 Downgraded to Baa1 (sf)

Cl. PEZ**, Downgraded to A2 (sf); previously on Jun 12, 2019 Affirmed A1 (sf)

Cl. X-A*, Affirmed Aaa (sf); previously on Jun 12, 2019 Affirmed Aaa (sf)

Cl. X-B*, Affirmed Aa3 (sf); previously on Jun 12, 2019 Affirmed Aa3 (sf)

* Reflects Interest Only Classes

** Reflects Exchangeable Classes

RATINGS RATIONALE

The ratings on six principal and interest (P&I) classes were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges.

The ratings on one P&I class was downgraded due to anticipated losses from specially serviced and troubled loans.

The ratings on two interest-only (IO) classes were affirmed based on the credit quality of the referenced classes.

The rating on exchangeable class, Cl. PEZ, was downgraded due to a decline in the credit quality of its referenced classes.

The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Our analysis has considered the effect on the performance of commercial real estate from the collapse in US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around our forecasts is unusually high. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties.

Moody's rating action reflects a base expected loss of 10.4% of the current pooled balance, compared to 8.9% at Moody's last review. Moody's base expected loss plus realized losses is now 9.3% of the original pooled balance, compared to 8.2% at the last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.

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 can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected.

Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance.

Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls.

METHODOLOGY UNDERLYING THE RATING ACTION

The methodologies used in rating all classes except exchangeable classes and interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1226187 and "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1227875. The principal methodology used in rating exchangeable classes was "Moody's Approach to Rating Repackaged Securities" published in June 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1230078. The methodologies used in rating interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1226187, "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1227875 and "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in February 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1111179. Please see the list of ratings at the top of this announcement to identify which classes are interest-only (indicated by the *) and exchangeable classes (indicated by the **). Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

DEAL PERFORMANCE

As of the July 10, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 10.5% to $961.2 million from $1.1 billion at securitization. The certificates are collateralized by 66 mortgage loans ranging in size from less than 1% to 14.4% of the pool, with the top ten loans (excluding defeasance) constituting 55.6% of the pool. Six loans, constituting 10.6% of the pool, have defeased and are secured by US government securities.

Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 15, compared to 17 at Moody's last review.

As of the July 2020 remittance report, loans representing 94% were current or within their grace period on their debt service payments, 1% were between 60 -- 89 days delinquent, and 2% were 90 days or more delinquent.

Eighteen loans, constituting 44.5% of the pool, are on the master servicer's watchlist, of which fourteen loans, representing 42.6% of the pool, indicate the borrower has requested relief in relation to coronavirus impact on the property. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance.

No loans have been liquidated from the pool and four loans, constituting 4.9% of the pool, are currently in special servicing. The largest specially serviced loan is the Hampton Inn & Suites -- Yonkers Loan ($23.3 million -- 2.4% of the pool), which is secured by a 150-unit hotel located in Yonkers, New York. The loan transferred to special servicing in November 2017 for imminent default and become REO in May 2019. The property's performance has declined significantly since 2016 due primarily to declines in revenue per available room (RevPAR). The property is not currently for sale and efforts are being made to stabilize operations before being taken to market. The remaining specially serviced loans are secured by hotels and retail, each loan accounting for 1% or less of the pool.

Moody's has also assumed a high default probability for three poorly performing loans, constituting 16.0% of the pool, and has estimated an aggregate loss of $73.6 million (a 37% expected loss on average) from these specially serviced and troubled loans. The largest troubled loan is the Stamford Plaza Portfolio Loan ($138.1 million -- 14.4% of the pool) and is further discussed below.

Moody's received full year 2019 operating results for 99% of the pool, and partial year 2020 operating results for 57% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 103%, compared to 102% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 20.3% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.6%.

Moody's actual and stressed conduit DSCRs are 1.62X and 1.05X, respectively, compared to 1.62X and 1.04X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance.

The top three conduit loans represent 35.1% of the pool balance. The largest loan is the Stamford Plaza Portfolio Loan ($138.1 million -- 14.4% of the pool), which represents a pari-passu portion of a $266.2 million mortgage loan. The property was also encumbered by an allocated $227.2 million mezzanine loan at closing. The loan is secured by an approximately 982,500 square feet (SF), Class A, four-building office complex located in Stamford, Connecticut. The loan has been on the watchlist since October 2018 due to a number of tenants vacating the properties resulting in a decline in the portfolio occupancy. As of June 2020, the portfolio was 65% occupied including approximately 7% in new leases with start dates in 2019 and 2020. Approximately 4% of the net rentable area (NRA) are expected to roll in 2020 and 20% in 2021. The largest tenant concentration in the portfolio, WR Berkley (8% of NRA), occupies multiple spaces on separate leases with lease expirations in 2021. As a result of the vacancy, the year-end 2019 NOI has declined over 60% since securitization and the loan's actual reported NOI DSCR was below 1.00X. The Stamford office market has significantly underperformed other large MSA's for several years. Per CBRE Econometric Advisors, vacancy rates for the Class A office submarket has hovered between 16%-18% since 2016. The Stamford office market vacancy rate as of Q1 2020 was 18.0%. After an initial 60-month interest-only period, the loan has amortized approximately 1% since securitization. Due to the loans' heightened risk of default, Moody's considers this loan troubled and has assumed a moderate loss.

The second largest loan is the Coastal Grand Mall Loan ($111.7 million -- 11.6% of the pool), which is secured by an approximately 631,200 SF component of a 1.1 million SF enclosed super-regional mall located in Myrtle Beach, South Carolina. The non-collateral anchors include Dillard's, Sears, and Belk and the collateral anchor, J.C. Penney, a ground lease tenant. The collateral is occupied a number of national tenants including Dick's Sporting Goods (8% of NRA), Cinemark (8% of NRA), and Bed, Bath, and Beyond (4% of NRA). The sponsor announced redevelopment plans in 2019 in which Dick's Sporting Goods will be relocated to a separate building and will no longer be part of the collateral. An entertainment venue is expected to backfill this space. As of March 2020, the collateral was 93% occupied and the in-line tenants (less than 10,000 SF) were 89% occupied. The Dick's Sporting Goods lease was renewed in February 2020 with a lease expiration in January 2022. The loan went into special servicing in March 2020 for payment hardship due to the coronavirus outbreak, returned to the master servicer in May 2020, and was then placed on the watchlist in July 2020 for borrower relief request. The loan has amortized approximately 11% since securitization and Moody's LTV and stressed DSCR are 87% and 1.24X, compared to 77% and 1.37X at the last review.

The third largest loan is the Beverly Connection Loan ($87.5 million -- 9.1% of the pool), which represents a pari-passu portion of a $175.0 million mortgage loan. The property was also encumbered by a $35.0 million B-note and $21.0 million mezzanine at closing. The loan is secured by an approximately 334,600 SF, two-level, power center located on the border of Beverly Hills and West Hollywood in Los Angeles, California. The collateral is comprised of a fee simple interest in approximately 270,700 SF of the property and a leasehold interest in the remaining portion with a ground lease expiration in December 2085. The largest tenant, Target, accounts for 30% of NRA with a lease expiration in 2029. Other national tenants at the property include Marshalls (10% of NRA), Ross Dress for Less (9% of NRA), Nordstrom Rack (9% of NRA), and Saks Fifth Avenue Off Fifth (8% of NRA). As of March 2020, the property was 95% occupied and has remained steady since 2018. The loan was placed on the watchlist in May 2020 for borrower relief request due to the coronavirus outbreak and is within its grace period for the July 2020 payment. The loan is interest-only through its term and Moody's LTV and stressed DSCR are 133% and 0.67X, respectively, compared to 121% and 0.72X at the last review.

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 at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

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 did not use any stress scenario simulations in its analysis.

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 ratings tab on the issuer/entity page for the respective issuer on www.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 www.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://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

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 www.moodys.com.

Please see www.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 ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Amy Wang Associate Analyst 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 Romina Padhi VP - Senior Credit Officer 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

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