DBRS Confirms All 15 Classes of Schooner Trust, Series 2007-8

DBRS has today confirmed the ratings of all 15 classes of Schooner Trust, Series 2007-8 Commercial Mortgage Pass-Through Certificates, Series 2007-8 as follows:

Class A-1 at AAA
Class A-2 at AAA
Class A-J at AAA
Class B at AA
Class C at A
Class D at BBB
Class E at BBB (low)
Class F at BB (high)
Class G at BB
Class H at BB (low)
Class J at B (high)
Class K at B
Class L at B (low)
Class XP at AAA
Class XC at AAA

All classes were confirmed with a Stable trend.

The ratings reflect the increased credit enhancement to the bonds from a collateral reduction of approximately 9.63% since issuance, the healthy weighted-average debt service coverage ratio (DSCR) of 1.53x for the pool and the strong performance of the ten largest loans in the pool, which had a straight average debt yield of 10.9% for 2009.

There is one loan on the servicer’s watchlist, representing 1.19% of the transaction balance, Prospectus ID#24, 1599 Hurontario Street. The property is a Class B office property located just south of Queen Elizabeth Way in Mississauga, Ontario. This loan is on the watchlist for a low DSCR at YE2009 of 0.08x; this figure is representative of reduced cash flow at the property due to a decline in occupancy after losing the property’s largest tenant with 44% of the NRA in 2008. After a few smaller tenants also vacated, the property occupancy was at 38% for much of 2009 before rebounding to 69% in the final months of the year and up to 93% as of August 2010. Altus InSite showed 3% available for lease as of November 2, 2010. The property performance should improve in the coming year; the borrower has invested heavily in the property since 2008, replacing the roof and renovating common areas at the property.

There is one small loan in special servicing in the pool, Prospectus ID#66, Bonsor Commercial, representing 0.18% of the transaction balance. This loan transferred to the special servicer in October 2009 for payment default; since that time, the special servicer has secured a judgment against the borrower and is pursuing rights against the Guarantor. The loan is secured by a small retail property comprised of 6,995 sf in Burnaby, British Columbia. The property is currently listed for sale by the borrower in the range of $2 million; however, the special servicer is pursuing a Conduct of Sale order to facilitate the direct sale of the property by the special servicer through their choice of broker. The property is currently 50% occupied and the outstanding advances, as of the October 2010 remittance report, total $147,000, putting the trust’s total exposure to this loan at $1.03 million. As such, if a loss is experienced, it should be minimal and sufficiently absorbed by the unrated Class M.

DBRS applied a net cash flow stress of 20% across all the loans in the pool and when comparing the DBRS required credit enhancement levels to the current credit enhancement for all classes, the confirmations as outlined were appropriate.

DBRS continues to monitor this transaction on a monthly basis in the Global CMBS Monthly Surveillance report, which can provide more detailed information on the individual loans in the pool.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodologies are CMBS Rating Methodology and CMBS Surveillance, which can be found on our website under Methodologies.