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

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

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

DBRS does not rate the $5.8 million first loss piece, Class M. The trends for all rated classes of the transaction are Stable.

The rating confirmations are supported by transaction-level performance that is in line with the metrics at the time of the last DBRS review. The transaction has a healthy weighted-average debt service coverage ratio (DSCR) of 1.53 times (x) and a weighted-average debt yield of 15.65%, based on the most recent financials. Since the last review, credit enhancement to the bonds has increased, primarily as a result of loan amortization.

There are currently four loans on the servicer’s watchlist, representing 7.65% of the pool balance. Three of the watchlisted loans are highlighted below:

Prospectus ID#8, 195 Cote St. Catherine (3.7% of the current pool balance), has been on the servicer’s watchlist since December 2010 because of an unauthorized second mortgage. The collateral for the trust loan is a 167-unit multifamily property located in the Outremont neighbourhood of Montréal. According to the servicer, the loan will remain on the servicer’s watchlist until the unauthorized second mortgage is no longer in place. The performance of the loan has been stable, with a YE2010 DSCR of 1.28x and an occupancy rate of 97.5% as of April 2011. DBRS will continue to monitor this loan.

Prospectus ID#12, Royal Bank Building (2.7% of the current pool balance), was placed on the servicer’s watchlist in May 2011 for having taxes in arrears in excess of $500,000. The collateral for the loan is a 75,000 square foot (sf) Class A office building located in New Westminster, British Columbia. As a result of the overdue taxes, the servicer was forced to make a property tax advance. Further exacerbating the issues with this loan is the fact that the property is only 57% occupied, based on a May 2011 rent roll. The YE2010 DSCR was 0.96x and this does not reflect the depressed occupancy for 2011. DBRS will continue to closely monitor the tax and occupancy rate issues.

Prospectus ID#33, Days Inn Dartmouth (0.8% of the current pool balance), has been on the servicer’s watchlist since November 2010 because of a low DSCR, which resulted from declining occupancy and RevPar. The collateral for the loan is a 142-key limited service hotel in Dartmouth, Nova Scotia. The property was a Future Inn at issuance but changed flags and is now a Days Inn. Performance at the property has declined since YE2008 when the DSCR was 1.67x and the occupancy rate was 50%. The YE2010 DSCR was -0.60x and the occupancy rate was 36%. Despite poor performance over the past two years, the loan has remained current and the borrower has put money into the property by renovating the banquet room and common areas and by adding an indoor pool.

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

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

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