Fitch Ratings has affirmed 14 classes of GS Mortgage Securities Trust 2019-GC39 commercial mortgage pass-through certificates (GSMS 2019-GC39).

The Rating Outlooks for eight of the affirmed classes were revised to Negative from Stable. The Outlook for one class remains Negative.

RATING ACTIONS

Entity / Debt

Rating

Prior

GSMS 2019-GC39

A-2 36260JAB3

LT

AAAsf

Affirmed

AAAsf

A-3 36260JAC1

LT

AAAsf

Affirmed

AAAsf

A-4 36260JAD9

LT

AAAsf

Affirmed

AAAsf

A-AB 36260JAE7

LT

AAAsf

Affirmed

AAAsf

A-S 36260JAH0

LT

AAAsf

Affirmed

AAAsf

B 36260JAJ6

LT

AA-sf

Affirmed

AA-sf

C 36260JAK3

LT

A-sf

Affirmed

A-sf

D 36260JAL1

LT

BBBsf

Affirmed

BBBsf

E 36260JAQ0

LT

BBB-sf

Affirmed

BBB-sf

Page

of 2

VIEW ADDITIONAL RATING DETAILS

KEY RATING DRIVERS

Increased 'Bsf' Loss Expectations: Fitch's current ratings incorporate a deal-level 'Bsf' rating case loss of 4.9%. There are seven Fitch Loans of Concern (FLOCs; 34.4% of the pool), including two loans (4.6%) in special servicing.

The Negative Rating Outlooks on classes A-S, X-A, B, C, X-B, D, X-D, E and F reflect increased pool loss expectations since Fitch's prior rating action, driven primarily by further performance declines of two FLOCs that recently transferred to special servicing, Tulsa Office Portfolio (2.5%) and 57 East 11th Street (2.1%). The Negative Outlooks also reflect the high overall office concentration, which accounts for 42% of the pool, and continued performance declines of the office collateral, including the largest loan in the pool, 101 California Street (10.7%), given deteriorating office market conditions in San Francisco.

Downgrades of up to one category are possible with continued occupancy and cashflow deterioration of the FLOCs, a prolonged workout on the specially serviced loans or updated appraisal valuations come in significantly below Fitch's expectations.

The largest contributor to overall pool loss expectations and largest increase in loss since the prior rating action is the Tulsa Office Portfolio loan, secured by a 1,026,650-sf office portfolio consisting of nine buildings in Tulsa, OK. The portfolio consists of older vintage buildings built between 1973 to 1984. The loan transferred to special servicing in March 2024 for imminent monetary default.

As of December 2023, occupancy for the portfolio dropped to 53.6% from 67% at YE 2022, 66% at YE 2021 and 77% at issuance. Approximately 13.7% of the portfolio NRA is scheduled to roll in 2024 and 14.6% in 2025. The servicer-reported NOI DSCR has fallen to 1.31x at YE 2023 from 1.67x at YE 2022, 1.52x at YE 2021 and 1.96x at issuance.

The portfolio has a granular rent roll with over 200 tenants, and no individual tenant accounts for more than 3% of the portfolio NRA. The largest tenants in the portfolio include the Federal Bureau of Investigation (3.0% of portfolio NRA; lease expiry in July 2025), Finance of America Reverse LLC (1.8%; February 2025) and Blackhawk Industrial (1.7%; September 2027).

Fitch's 'Bsf' rating case loss of 27.9% (prior to concentration add-ons) reflects an 11% cap rate, 10% stress to the YE 2023 NOI and factors an increased probability of default due to the declining portfolio occupancy and loan's delinquency status.

The second largest contributor to overall pool loss expectations and second largest increase in loss since the prior rating action is the 57th East 11th Street loan, secured by a 64,460-sf office building located in the Greenwich Village neighborhood of New York City. The property was formerly 100% occupied by WeWork. The servicer noted that WeWork stopped paying rent in October 2023 and is no longer operating at the subject after rejecting the lease during bankruptcy proceedings.

The loan transferred to special servicing in February 2024 due to payment delinquency. Fitch's 'Bsf' rating case loss (prior to concentration adjustments) of 34.1% reflects a 9% cap rate, 5% stress to the YE 2022 NOI and factors a higher probability of default due to the fully vacated space and loan default.

The third largest contributor to overall pool loss expectations is The Garfield Apartments loan, which is secured by a multifamily/retail property located in Cleveland, OH.

The latest reported YE 2022 occupancy for the multifamily portion was 80%, up from a historical low of 67% in June 2020, but remains below 82% as of December 2019 and 94% as of February 2019. Occupancy had improved due to the property offering lower rents and rent concessions in 2019 and 2020. The servicer-reported NOI DSCR was 1.28x at YE 2022, compared with 0.73x at YE 2021, 0.70x at YE 2020 and 1.00x at YE 2019. Per the servicer, updated 2023 financials have not yet been provided by the borrower.

The retail portion, which accounts for approximately 25% of the property's revenue, is occupied by Marble Room (lease expiry February 2032), Harness Cycle (January 2027) and Shake Shack (May 2029). As of February 2022, the multifamily leased rent averaged $1,332 per unit, down from $1,637 per unit as of February 2019.

Fitch's 'Bsf' rating case loss of 18.7% (prior to concentration add-ons) reflects an 8.75% cap rate and a 7.5% stress to the YE 2021 NOI.

Increased CE: As of the April 2024 distribution date, the pool's aggregate balance has been paid down by 9.4% to $726.8 million from $802.5 million at issuance. Two loans (3.1% of the pool) have been defeased. Seventeen loans (67%) are full-term interest-only (IO), and the remaining 33% of the pool is amortizing. Scheduled loan maturities include two loans (9%) in 2024, one loan (2%) in 2028, 30 loans (80%) in 2029 and one loan (Moffett Towers II Building V, 9%) in 2035.

Investment-Grade Credit Opinion Loans: Three loans comprising 23.7% of the transaction received an investment-grade credit opinion at issuance. Fitch no longer considers the 101 California Street (10.7%) loan to have the characteristics of an investment-grade credit opinion given increased vacancy.

101 California Street is secured by a 1,251,483-sf office property located in San Francisco's Northern Financial District. As of December 2023, the property was 76.1% occupied, compared 76.3% at YE 2022, 76.2% at YE 2021, 88.1% at YE 2020 and 92.1% at issuance. Additional occupancy declines are expected as 16.0% of the NRA is scheduled to roll in 2024 and 6.2% in 2025. According to 2Q 2024 CoStar data, the Financial District submarket has a vacancy rate of 30.9% and an average rental rate of $52.88 psf, compared to the subject of 23.9% and $67.40, respectively.

The 365 Bond loan has since repaid in full since issuance. Fitch maintains an investment-grade credit opinion on the Moffett Towers II Building V (8.9%) loan.

RATING SENSITIVITIES

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

Downgrades to super senior 'AAAsf' classes are not expected due to their 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 junior 'AAAsf' rated classes with Negative Outlooks are possible with continued performance deterioration of the FLOCs, increased expected losses and limited to no improvement in class CE, or if interest shortfalls occur.

Downgrades to classes rated in the 'AA-sf' and 'A-sf' 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 classes rated 'BBBsf', 'BBB-sf' and 'Bsf' are likely with higher than expected losses from continued underperformance of the FLOCs, in particular Tulsa Office Portfolio, 57th East 11th Street and 101 California, and/or with greater certainty of losses on the specially serviced loans and/or FLOCs.

Downgrades to distressed 'CCCsf' ratings would occur should additional loans transfer to special servicing and/or default, as losses are realized and/or become more certain.

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

Upgrades to classes rated in the 'AA-sf' and 'A-sf' category may be possible with significantly increased CE, coupled with stable-to-improved pool-level loss expectations and improved performance on the FLOCs, in particular Tulsa Office Portfolio, 57th East 11th Street, 101 California and The Garfield Apartments.

Upgrades to the 'BBBsf' and 'BBB-sf' 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 the 'Bsf' rated classes would 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' category rated class is 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

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