Research: Rating Action: Moody’s assigns definitive ratings to seven pooled CMBS classes and four loan-specific CMBS classes of CGCMT 2022-GC48 Mortgage Trust

New York, June 21, 2022 — Moody’s Investors Service (“Moody’s”) has assigned definitive ratings to seven classes of pooled CMBS securities and four classes of loan-specific CMBS securities, to be issued by Citigroup Commercial Mortgage Trust 2022-GC48, Commercial Mortgage Pass Through Certificates, Series 2022-GC48:

Cl. A-1, Definitive Rating Assigned Aaa (sf)

Cl. A-2, Definitive Rating Assigned Aaa (sf)

Cl. A-SB, Definitive Rating Assigned Aaa (sf)

Cl. A-4, Definitive Rating Assigned Aaa (sf)

Cl. A-5, Definitive Rating Assigned Aaa (sf)

Cl. X-A*, Definitive Rating Assigned Aaa (sf)

Cl. A-S, Definitive Rating Assigned Aa2 (sf)

Cl. YL-A****, Definitive Rating Assigned A3 (sf)

Cl. YL-B****, Definitive Rating Assigned Baa3 (sf)

Cl. YL-C****, Definitive Rating Assigned Ba3 (sf)

Cl. YL-D****, Definitive Rating Assigned B2 (sf)

* reflects interest only classes

**** reflects loan-specific classes

RATINGS RATIONALE

The pooled certificates, which are Class A-1, Class A-2, Class A-SB, Class A-4, Class A-5, Class A-S, Class X-A, are collateralized by 32 loans secured by 88 properties. The loan-specific (“rake”) certificates, which are Class YL-A, Class YL-B, Class YL-C, Class YL-D, are collateralized by a $221.5 million B-note, which is a junior component of a $539.5 million, fixed-rate mortgage loan secured by the borrower’s fee simple interest in the Yorkshire and Lexington Towers, two multifamily buildings located in the Upper East Side in Manhattan. The rake certificates will be entitled to receive distributions only from the B-note, which will not be part of the pool of mortgage loans backing the pooled certificates. Similarly, the rake certificates will only incur losses that are allocated to the B-note.

We assigned a SCA of a1 (sca.pd) to the senior component of the Yorkshire & Lexington Towers loan, which represents approximately 9.5% of the pool balance. The loan is secured by the borrower’s fee interest in two multifamily buildings comprised of 808 residential units located in New York, NY.

We assigned a SCA of aa2 (sca.pd) to the Doubletree Ontario loan, which represents approximately 4.7% of the pool balance. The loan is secured by the borrower’s fee simple in a 482-room hospitality property located in Ontario, CA.

We assigned a SCA of a3 (sca.pd) to the One Wilshire Street loan, which represents approximately 3.7% of the pool balance. The loan is secured by the borrower’s fee simple interest in a 661,553 SF building comprised of data center and office space located in downtown Los Angeles, CA.

We assigned a SCA of baa2 (sca.pd) to the Roselle & Color loan, which represents approximately 2.1% of the pool balance. The loan is secured by the borrower’s fee simple interest in two retail shopping center totaling 100,851 SF in New Jersey.

We assigned a SCA of aa3 (sca.pd) to the 360 Rosemary loan, which represents approximately 1.3% of the pool balance. The loan is secured by the borrower’s fee simple interest in a 20-story, 313,002 square foot office building in West Palm Beach, FL.

We assigned a SCA of a2 (sca.pd) to the 111 River Street loan, which represents approximately 1.3% of the pool balance. The loan is secured by the borrower’s fee simple interest in a 13-story, 557,714 square foot office building in Hoboken, NJ.

Moody’s approach to rating CMBS deals combines both commercial real estate and structured finance analysis. Based on commercial real estate analysis, Moody’s determines the credit quality of each mortgage loan and calculates an expected loss on a loan specific basis. Under structured finance, the credit enhancement for each certificate typically depends on the expected frequency, severity, and timing of future losses. Moody’s also considers a range of qualitative issues as well as the transaction’s structural and legal aspects. 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.

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 Actual DSCR of 1.91x (1.48x excluding SCAs) is lower than the 1Q 2022 ¬†trailing four quarter conduit/fusion transaction average of 2.61x (2.07x excluding SCAs). The Moody’s Stressed DSCR of 0.98x (0.86x ¬†excluding SCAs) is lower than the 1Q 2022 trailing four quarter conduit/fusion transaction average of 1.05x (0.91x excluding SCAs). With respect to the Yorkshire & Lexington loan, Moody’s first mortgage actual DSCR is 1.94x and Moody’s first mortgage stressed DSCR is 0.64x.

The pooled trust loan balance of $633,273,980 represents a Moody’s LTV ratio of 112.1% (123.0% excluding SCAs), which is higher than the 1Q 2022 ¬†trailing four quarter conduit/fusion transaction average of 107.4% (116.5% excluding SCAs). The Moody’s adjusted LTV is 98.9% (108.4% excluding SCAs) and is based on our adjusted Moody’s value taking into account the current interest rate environment. With respect to the Yorkshire & Lexington loan, the first mortgage balance of $539.5 million represents a Moody’s LTV of 131.2% and a Moody’s adjusted LTV of 113.7%.

Moody’s also considers both loan level diversity and property level diversity when selecting a ratings approach. With respect to loan level diversity, the pool’s loan level Herfindahl score is 19.8 (16.1 excluding SCAs). The transaction loan level diversity profile is lower than Moody’s-rated transactions during the prior four quarters, which averaged 28.3 (26.3 excluding SCAs). With respect to property level diversity, the pool’s property level Herfindahl score is 23.9 (19.5 excluding SCAs).

Notable strengths of the transaction include: six loans assigned an investment grade Structured Credit Assessment, the number of loans securitized by multiple properties, and low single tenant share.

Notable concerns of the transaction include: pool’s high Moody’s loan-to-value (MLTV) ratio, low pool diversity, amortization profile, high refinancing share and higher interest rate.

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 pool’s weighted average property quality grade is 1.96 (2.06 excluding SCAs), which is below the 1Q 2022 trailing four quarters average score of 2.04 (2.28 excluding SCAs). With respect to the Yorkshire & Lexington Towers loan, the property quality grade is 1.25.

The principal methodology used in rating all pooled classes except interest-only classes was “US and Canadian Conduit/Fusion Commercial Mortgage-Backed Securitizations Methodology” published in November 2021 and available at https://ratings.moodys.com/api/rmc-documents/74473. The methodologies used in rating interest-only classes were “US and Canadian Conduit/Fusion Commercial Mortgage-Backed Securitizations Methodology” published in November 2021 and available at https://ratings.moodys.com/api/rmc-documents/74473 and “Moody’s Approach to Rating Structured Finance Interest-Only (IO) Securities” published in February 2019 and available at https://ratings.moodys.com/api/rmc-documents/59126. The principal methodology used in rating all loan-specific classes was “Large Loan and Single Asset/Single Borrower Commercial Mortgage-Backed Securitizations Methodology” published in May 2022 and available at https://ratings.moodys.com/api/rmc-documents/388873. Please see the list of ratings at the top of this announcement to identify which classes are interest-only (indicated by the *) and loan-specific (indicated by the ****). Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.

Moody’s analysis of credit enhancement levels for conduit deals is driven by property type, Moody’s actual and stressed DSCR, and Moody’s property quality grade (which reflects the capitalization rate Moody’s uses to estimate Moody’s value). Moody’s fuses the conduit results with the results of its analysis of investment-grade structured credit assessed loans and any conduit loan that represents 10% or greater of the current pool balance.

Moody’s analysis considers the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit estimates; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published 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 paydowns 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_1331860.

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.

Veronica Huang
Asst Vice President – 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

Neeraj Ahuja
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

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