KBRA Downgrades Six Ratings and Affirms All Other Ratings for CGCMT 2015-GC35
23 Oct 2026 | New York
KBRA downgrades the ratings of six classes of certificates and affirms all other outstanding ratings of CGCMT 2015-GC35, a CMBS conduit transaction. The transaction has been reduced to seven assets with an aggregate balance of $390.6 million, from 63 loans totaling $1.1 billion at securitization. The rating actions are based on our identification of six K-LOCs (84.6% of the pool balance), KBRA's estimated losses of $190.5 million (which, if realized, would impact the class C certificates and below) and corresponding recoveries; realized losses totaling $7.5 million, which were allocated to the class H certificates; and cumulative interest shortfalls of $14.9 million affecting the class C certificates and below. If realized, estimated losses would reduce the principal balance of classes D, E, F, G, and H to zero and reduce the principal balance of the class C certificates by 84.6%.
As of the October 2026 remittance period, there are five specially serviced assets (59.0% of the pool balance), of which two (25.2%) are REO and two (31.6%) are non-performing matured balloon. KBRA identified six K-LOCs (84.6%), including the specially serviced assets. Of the K-LOCs, five (82.4%) have estimated losses. There is one loan, DoubleTree Jersey City ($60.0 million, 15.4%), which has not been identified as a K-LOC and is current in payment with an October 2027 maturity. The details of the K-LOCs are outlined below.
Paramus Park ($120.0 million, 30.7%, Specially Serviced, Non-Performing Matured Balloon)
- The loan is collateralized by a 308,871 sf portion of a two-story, 767,928 sf regional mall located in Paramus, New Jersey, approximately 20 miles northwest of Midtown Manhattan. Macy’s is the anchor. Stew Leonard’s, a family-owned-and-operated grocery store, opened an 80,000 sf store in a portion of the former Sears space in September 2019. Neither Macy's nor the former Sears site are part of the loan collateral. Brookfield Property Partners is the sponsor.
- The loan transferred to the special servicer in September 2025 for maturity default when the borrower failed to pay off the loan at its scheduled maturity that month. A default notice was issued in October 2025 and the loan is cash managed. A receiver was appointed in May 2026 and the special servicer is reviewing recovery strategies. The servicer's March 2026 rent roll indicated the subject was 79.3% leased, down from 87.0% at last review and 94.9% at closing. Leases comprising 30.4% of total base rent and 36.8% of collateral sf are scheduled to expire through 2027.
- The servicer reported an occupancy of 84.0% and a DSC of 0.85x for the six months ended June 2026. An appraisal dated November 2025 valued the property at $61.4 million ($199 per sf), which is 70.8% below the $210.0 million ($680 per sf) appraised value at issuance. As a result, the asset carries an ARA of $64.5 million, resulting in a cumulative ASER of $1.7 million. KBRA's analysis resulted in an estimated loss of $73.6 million (61.4% estimated loss severity). The estimated loss is based on a KBRA liquidation value of $49.4 million ($160 per sf) and projected total exposure of $123.0 million. The liquidation value is derived from a direct capitalization approach using a KNCF of $5.4 million and a capitalization rate of 11.00%.
South Plains Mall ($100.0 million, 25.6%, Current)
- The loan is collateralized by an 820,762 sf portion of a 1.1 million sf super-regional mall located in Lubbock, Texas. The asset is approximately 330 miles west of Dallas.
- The loan became matured non-performing in December 2025, but has been reflected as current since March 2026 following a modification/extension. The loan was modified in February 2026 to provide a four-year maturity extension through November 2029, while maintaining the existing 4.2% interest rate.
- The servicer reported an occupancy of 81.0% and a 1.76x DSC for the TTM ended June 2026. An appraisal dated December 2025 valued the property at $114.0 million ($139 per sf), which is 69.0% below the $368.0 million ($448 per sf) value at issuance. As of October 2026, the loan is not specially serviced and current on payments. However, in the event of default, KBRA estimated that the loan could experience an estimated loss given default of $86.5 million (43.3% estimated loss severity) on the whole loan balance of $200.0 million, of which $43.3 million is allocated to this trust. The estimated loss is based on a KBRA liquidation value of $114.0 million ($139 per sf) and projected total exposure of $200.5 million. The liquidation value is derived from a direct capitalization approach using a KNCF of $13.7 million and a capitalization rate of 12.00%.
Illinois Center ($55.3 million, 14.2%, Specially Serviced, REO)
- The asset of the trust comprises two adjacent, Class-A office towers containing 2.1 million sf, located in the East Loop submarket of Chicago, Illinois. The two 32-story towers, 111 East Wacker and 233 North Michigan Avenue, are situated on a 3.4-acre site and were originally constructed in 1969 and 1972, respectively.
- The loan transferred to the special servicer in April 2024 due to delinquency. The special servicer initially filed for foreclosure in November 2024 and filed for a summary judgment in May 2026, which went unopposed by the borrower. According to the most recent servicer commentary, the parties are working with the sheriff to schedule a foreclosure sale. According to the March 2026 rent roll, the buildings were 33.0% leased; 111 East Wacker was 49.0% leased and 233 North Michigan was 17.4% leased.
- An updated March 2026 appraisal valued the property at $66.5 million ($32 per sf), which was 82.9% below the $390.0 million ($186 per sf) appraisal value at issuance. The asset was deemed non-recoverable by the servicer in May 2025, and cumulative non-recoverable interest totals $3.9 million for this transaction. Additionally, a total of $3.1 million in non-recoverable servicer advances has been reimbursed by the trust to date. KBRA’s analysis resulted in an estimated loss of $198.0 million (82.7% estimated loss severity) on the aggregate outstanding debt of $239.5 million, of which $45.7 million of the estimated loss is allocated to this transaction. The estimated loss is based on a KBRA liquidation value of $63.2 million ($30 per sf) and projected total exposure of $261.2 million. The liquidation value considers a distressed non-stabilized disposition of the asset.
750 Lexington Avenue ($43.1 million, 11.0%, Specially Serviced, REO)
- The asset of the trust consists of fee and leasehold interests in a 31-story 382,256 sf office property located in the Midtown neighborhood of Manhattan, New York. The collateral includes 22,680 sf of ground-floor retail space. A portion of the property is subject to a ground lease that expires in 2041, with three 12-year renewal options remaining. The ground lease rent was previously reset in 2018 and will reset every 12 years thereafter.
- The loan was most recently transferred to the special servicer in October 2023 due to delinquency. A foreclosure action was filed in May 2024, summary judgment was granted in June 2025, and the trust ultimately took title to the asset in March 2026. In May 2024, the property’s largest tenant, WeWork, assumed and amended its lease through the tenant’s bankruptcy proceedings to reduce the lease term, reduce base rent, convert to a gross lease, add revenue sharing, and reduce the tenant’s guaranty. According to the May 2026 rent roll, WeWork is the second-largest tenant by base rent (18.7%) and largest tenant by physical footprint (22.8% of collateral sf) with a lease expiration in February 2029.
- An updated January 2026 appraisal valued the property at $39.0 million ($102 per sf), which was 87.0% below the $300.0 million ($785 per sf) appraisal value at issuance. The asset was deemed non-recoverable by the servicer in March 2024, and cumulative non-recoverable interest totaled $5.3 million. Additionally, a total of $1.9 million of non-recoverable servicer advances has been reimbursed by the trust to date. KBRA’s analysis resulted in an estimated loss of $115.6 million (94.0% estimated loss severity) on the aggregate outstanding balance of $122.9 million, of which $40.5 million of the estimated loss is allocated to this transaction. The estimated loss is based on a KBRA liquidation value of $26.6 million ($70 per sf) and projected total exposure of $142.1 million. The liquidation value is derived from a direct capitalization approach using a stabilized KNCF of $3.5 million, a capitalization rate of 9.00%, and a downward adjustment to account for TI/LC costs and income lost during the stabilization period.
The two remaining K-LOCs account for 3.1% of the pool balance:
- 411 East Franklin Street ($8.9 million, 2.3%, Specially Serviced, Performing Matured Balloon) is collateralized by a 140,040 sf office building located in Richmond, Virginia, within the city’s CBD. The loan defaulted at maturity in October 2025. Watchlist commentary indicates the lender and borrower are negotiating terms for a maturity extension. A cash trap was activated as the largest tenant, Hourigan Construction (34.9% of total base rents, 27.4% of collateral sf), failed to renew its lease by January 2025. The Hourigan Construction lease was subsequently extended until January 2029. At this time, KBRA does not estimate a loss on this asset.
- Rite Aid Allentown ($3.4 million, 0.9%, Specially Serviced, Non-Performing Matured Balloon) is collateralized by a 13,824 sf single-tenant retail store located in Allentown, Pennsylvania. The loan defaulted at its November 2025 maturity and became 30 days delinquent. The former sole tenant, Rite Aid, filed for bankruptcy in October 2023 and vacated in December 2024. A cash trap is active due to a below-threshold DSC and the vacancy created by Rite Aid. The lender and borrower have reached an agreement on terms for a maturity extension, which is pending approval. The loan was deemed non-recoverable in May 2026 and cumulative non-recoverable interest totals $78,457. KBRA's analysis resulted in an estimated loss of $2.6 million (77.4% estimated loss severity). The estimated loss is based on a KBRA liquidation value of $1.2 million ($85 per sf) and projected total exposure of $3.8 million. The liquidation value is derived from a direct capitalization approach using a stabilized KNCF of $111,660, a stabilized occupancy rate of 95.0%, and a capitalization rate of 9.50%.
Details concerning the classes with rating changes are as follows:
- Class A-S to A (sf) from AAA (sf)
- Class B to BB- (sf) from BBB- (sf)
- Class C to CCC (sf) from B- (sf)
- Class PEZ to CCC (sf) from B- (sf)
- Class D to CC (sf) from CCC (sf)
- Class E to C (sf) from CC (sf)
Details concerning the ratings affirmations are as follows:
- Class A-4 at AAA (sf)
- Class F at C (sf)
- Class G at C (sf)
Rating Sensitivities
Future rating actions will be dependent upon the ongoing assessment of the timing and likelihood of ultimate payment of principal and accrued interest on the rated certificates. The assessment will consider the expected and actual losses on the remaining assets in the transaction, as well as the magnitude and extent of interest shortfalls, if any, on the certificates.
To access ratings and relevant documents, click here.