DBRS Downgrades Ten Classes of Bear Stearns Commercial Mortgage Securities Trust, Series 2007-TOP28

DBRS has today downgraded the ratings for ten classes of Bear Stearns Commercial Mortgage Securities Trust, Series 2007-TOP28 as follows:

-- Class A-J from A (sf) to A (low) (sf)
-- Class B from BBB (high) (sf) to BBB (sf)
-- Class C from BBB (sf) to BBB (low) (sf)
-- Class D from BB (sf) to BB (low) (sf)
-- Class E from BB (low) to B (sf)
-- Class F from B (sf) to B (low) (sf)
-- Class G from B (low) (sf) to CCC (sf)
-- Class M from CCC (sf) to C (sf)
-- Class N from CCC (sf) to C (sf)
-- Class O from CCC (sf) to C (sf)

Classes A-J, B, C, D, E and F have Stable trends. Classes M, N and O have Interest in Arrears.

DBRS has also confirmed eight classes with Stable trends in the transaction as follows:

-- Class A-1A at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-1 at AAA (sf)
-- Class X-2 at AAA (sf)

DBRS confirmed four classes with no trend as follows:

-- Class H at CCC (sf)
-- Class J at CCC (sf)
-- Class K at CCC (sf)
-- Class L at CCC (sf)

These rating actions reflect the increase in the number of delinquent and specially serviced loans in the pool since the last full surveillance review of this transaction, conducted by DBRS in July 2011. At that time, there were four specially serviced loans (three of which were delinquent) in the pool, representing 0.96% of the outstanding pool balance as of the June 2011 remittance report. As of the March 2012 remittance report, there are now seven loans in special servicing (all of which are delinquent), representing 1.90% of the pool balance. The largest of these loans represents 0.41% of the pool.

Three loans have been liquidated from the trust since issuance, resulting in cumulative losses of $10.04 million and a weighted-average loss severity of approximately 45% as of the March 2012 remittance report. Based on the most recent appraisal figures and the updated performance and workout information provided by the servicer for each specially serviced loan, DBRS has projected additional losses in excess of $16 million to the trust that could be realized as those loans are resolved.

There are also 65 loans representing 26.60% of the outstanding pool balance on the servicer’s watchlist as of the March 2012 remittance report. Six of these loans, representing 9.96% of the pool balance, are in the Top Fifteen loans in the pool. The weighted-average debt service coverage ratio (DSCR) for the loans on the watchlist was 1.01 times (x) as of the March 2012 remittance report.

The largest loan on the servicer’s watchlist is Prospectus ID #5 (The Shops at Biddeford Crossing), representing 2.69% of the pool. This loan is secured by a retail center anchored by Lowe’s and Target, located in Biddeford, Maine. The Target is not part of the collateral, but the Lowe’s, which operated on a ground lease, is included in the security for the loan. In late 2011, Lowe’s vacated the property prior to its 2026 ground lease expiration. The tenant represented 43% of the collateral net rentable area (NRA) and will continue to pay rent through the lease expiration. The property was 94% leased at January 2012 and the servicer has confirmed that there are no co-tenancy clauses in the other leases at the property related to the departure of Lowe’s. The servicer has also advised that the Lowe’s space is being marketed by the tenant for sublease. DBRS has placed the loan on the DBRS HotList and will closely monitor the loan for developments.

The largest loans in the pool are generally performing well, with a weighted-average DSCR of 1.24x for the Top Fifteen as of the most recent reporting available; the weighted-average DSCR for the pool overall was 1.40x, with a weighted-average debt yield of 9.6%.

There are four loans shadow-rated investment grade by DBRS in this transaction, representing 19.35% of the pool balance. The shadow ratings reflect the strong operating performance for each of the loans and have been confirmed as part of this review.

As part of this surveillance review, DBRS analyzed the loans on the servicer’s watchlist, the delinquent and specially serviced loans, and the Top Fifteen loans in the pool. Combined, these loans represent 74.7% of the outstanding pool balance as of the March 2012 remittance report.

For additional detail on the current status and DBRS’s viewpoint on the largest loans in the pool, the loans in special servicing and the loans on the servicer’s watchlist, please see the March 2012 Monthly Surveillance Report for this transaction, which will be published shortly.

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

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