DBRS Downgrades Five, Confirms 18 Classes of Morgan Stanley Capital I Trust, Series 2007-TOP27

DBRS has today confirmed the following classes of Morgan Stanley Capital I Trust, Series 2007-TOP27:

Classes A-1, A-2, A-3, A-4, A-1A, A-AB, A-M, A-MFL and X at AAA (sf)
Classes A-J at A (sf)
Class F at CCC (sf)
Classes H, J, K, L, M, N and O at C (sf)

DBRS has also downgraded the following classes:

Class B to BBB (low) (sf) from BBB (sf)
Class C to BB (low) (sf) from BB (high) (sf)
Class D to B (low) (sf) from B (high) (sf)
Class E to CCC (sf) from B (sf)
Class G to C (sf) from CCC (sf)

The downgrades are a result of DBRS’s increased estimates of projected losses for the loans in special servicing, in addition to realized losses that have occurred since December 2010.
Following this action, DBRS considers the trends on Classes A-1 through D to be Stable.

As of the December 2011 remittance, there are ten loans in special servicing, representing 4.4% of the current pool balance. The most pivotal loans are Grand Mart Chicago Portfolio (Prospectus ID#50, 0.53% of the current pool balance), Empire Towers (Prospectus ID#52, 0.54% of the current pool balance) and Comfort Suites BWI Airport (Prospectus ID#51, 0.56% of the current pool balance). DBRS current estimates of losses from loans in special servicing are expected to be contained to Class G.

The Grand Mart Chicago Portfolio loan is secured by three single-tenant retail properties located in Chicago’s Naperville-Joliet submarket. All three properties are vacant and formerly housed a grocery store. This loan has been in special servicing since March 2009 and the asset is real estate owned (REO). An updated appraisal dated August 2011 suggests that the value of the property has declined significantly since issuance, and the advance-to-value ratio, which is approaching 50% as of the December 2011 remittance, has led the servicer to deem the asset non-recoverable for future advances. Based on the information available, DBRS projects a loss of 87% to the loan.

Empire Towers is a 141,667 square foot (sf) mixed-use property in Glen Burnie, Maryland, just south of Baltimore. The loan was transferred to special servicing in May 2009 because of payment default. An August 2011 servicer site inspection noted that the retail units at the property had been fully leased at the time of inspection, but that the office component had above-market vacancy levels. A foreclosure sale occurred on October 28, 2011, and the asset is now REO. DBRS is currently projecting a 69% loss to this loan.

The Comfort BWI Airport loan transferred to special servicing in January 2010 and is due for the December 2009 and all subsequent payments according to the terms of the loan. Collateral for the loan is a 137-key limited service hotel located near the Baltimore/Washington International Airport (BWI) in Maryland. The property is well-located, and a recent servicer site inspection noted the property to be in good condition; however, the hotel market surrounding BWI is considered highly saturated. A foreclosure sale occurred on March 15, 2011, and the asset is now REO. DBRS is currently projecting a 64% loss to this loan.

As of the December 2011 remittance, 215 of the original 225 loans remain in the pool. The pool is concentrated in the top fifteen loans, which represent nearly 37% of the current pool balance, and the top ten loans, which represent nearly 30% of the current pool balance. The weighted-average debt service coverage ratio (DSCR) for the top fifteen loans is 1.63 times (x).

In addition to these rating actions, DBRS maintains investment-grade shadow ratings on 15 loans in the pool.

As part of its review, DBRS analyzed the top fifteen loans, the 15 shadow-rated loans, the servicer’s watchlist and the ten specially serviced loans. Together these account for approximately 71.8% of the current pool balance.

Note:
All figures are in U.S. 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.