DBRS Confirms Eleven, Downgrades 17 Classes of Bear Stearns Commercial Mortgage Securities Trust, 2007-PWR18

DBRS has confirmed the ratings of Bear Stearns Commercial Mortgage Securities Trust, 2007-PWR18 as follows:

-Class A-1 at AAA
-Class A-1A at AAA
-Class A-2 at AAA
-Class A-3 at AAA
-Class A-AB at AAA
-Class A-4 at AAA
-Class A1-A at AAA
-Class A-M at AAA
-Class AM-A at AAA
-Class X-1 at AAA
-Class X-2 at AAA

In addition, DBRS has downgraded the ratings of 17 classes as follows:

-Class A-J to BBB (high) from A
-Class AJ-A to BBB (high) from A
-Class B to BBB from A (low)
-Class C to BBB (low) from A (low)
-Class D to BB (high) from BBB
-Class E to BB from BBB
-Class F to B (high) from BBB (low)
-Class G to B (low) from BB
-Class H to CCC from B (high)
-Class J to CCC from B
-Class K to C from B (low)
-Class L to C from CCC
-Class M to C from CCC
-Class N to C from CCC
-Class O to C from CCC
-Class P to C from CCC
-Class Q to C from CCC

All trends are Stable. In addition, Classes N through Q have interest in arrears and have been noted as such.

The downgrades are based on the following:

There are 16 loans in special servicing, representing approximately 12% of the current pool balance. DBRS has liquidated or modified these loans with an implied loss to the trust for modeling purposes. Based on the 16 loans currently in special servicing and the corresponding loss estimations, DBRS projects the losses associated with these loans to erode all of Classes S through L and a portion of Class K. Further prompting the downgrades is the declining performance of the 45 loans (27% of the pool balance) on the servicer’s watchlist.

The pool is heavily concentrated by loans secured by retail and hotel properties, 35.4% of the pool and 15.1% of the pool, respectively. Both of these properties types have experienced significant cash flow stress in the recent economic downturn, to which much of the transaction’s performance decline can be attributed.

Since issuance, the current credit enhancement levels at the lower bond classes have decreased because of the losses that have been realized by the trust. Correspondingly, the DBRS model required credit enhancement levels have increased based on the deteriorating cash flows and credit fundamentals since issuance, and as such, DBRS has downgraded the above mentioned classes.

DBRS has confirmed the shadow ratings of Prospectus ID#33, Westridge Square Shopping Centre, at BBB (low) and Prospectus ID#112, Stor It Self Storage – Long Beach, at BBB. Due to a decline in performance since issuance, DBRS has removed the shadow rating on Prospectus ID#17, Aviata Apartments.

The majority of the anticipated losses are associated with Prospectus ID#5 (RRI Hotel Portfolio). This loan is secured by 79 Red Roof Inn (RRI) hotels (9,423 rooms) across 24 states. As with many lodging properties, the RRI performance has declined. The YE2008 DSCR was reported at 1.17x and further plummeted to a year-to-date level of 0.86x as of June 2009. The loan transferred to the special servicer June 8, 2009, due to delinquent May 2009 and June 2009 payments as well as the borrower's indication that they were unwilling and unable to remit future payments. The loan is a pari-passu piece of a $465 million loan.

As part of its review, DBRS analyzed the shadow-rated loans, the servicer’s watchlisted loans, the specially serviced loans, and the remaining top ten loans, which together comprise approximately 78% of the current pool balance.

DBRS continues to monitor this transaction on a monthly basis in the Global CMBS Monthly Surveillance report which can be found at www.dbrs.com.

Note:
All figures are in U.S. dollars unless otherwise noted.

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