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)

All trends are Stable.

The rating confirmations reflect the increased credit enhancement from a collateral reduction of approximately 18.36% since issuance. As of the October 2012 remittance report, 14 loans have paid out of the pool since issuance, leaving 54 loans remaining in the transaction. The weighted-average debt service coverage ratio (DSCR) and weighted-average debt yield remain stable at 1.47 times (x) and 62.3%, respectively.

There are currently three loans on the servicer’s watchlist, representing 4.37% of the pool balance. These loans remain current, but are reporting performance issues and have been placed on the servicer’s watchlist. Two of these loans are highlighted below.

The Royal Bank Building loan (Prospectus ID#12) is secured by a 75,000 sf Class A office building located in the Uptown district of New Westminster, British Columbia. The loan has been on the servicer’s watchlist since May 2011 for having taxes in arrears owed to the City of New Westminster. According to the servicer, the borrower is making arrangements to have all outstanding taxes paid and will contact the servicer when the plan is in place. According to the May 2012 servicer site inspection, the property’s occupancy rate improved to 97% compared to 68% at YE2011. While the YE2011 DSCR declined to 0.78x compared to 0.96x at YE2010, it does not take into account the rental revenue that is generated by the new tenant at the property. According to the May 2012 servicer site inspection, the property remains in Good condition. DBRS will continue to closely monitor the tax issue.

The Days Inn Dartmouth loan (Prospectus ID#33) is secured by a 142-key limited service hotel in Dartmouth, Nova Scotia. The loan has been on the servicer’s watchlist since November 2010 because of a low DSCR, which is a result of a declining occupancy rate and RevPAR. Performance at the property has declined since YE2008 when the DSCR was 1.67x and the occupancy rate was 50%. The YE2011 DSCR was 0.04x and the occupancy rate was 36%, with the average daily rate (ADR) and RevPAR of $85.18 and $30.82, respectively. There has not been any change in performance over the past year as YE2011 figures are in line with YE2010 figures. Additionally, the June 2012 servicer site inspection rated the property in Below Average condition as there were two down rooms, minor fire code violations and various cosmetic deficiencies. As a result, the servicer released funds from the furniture, fixtures and equipment (FF&E) reserve to replace mattresses, bedding and televisions. Despite the poor performance over the past three years, the loan has remained current. The borrower recently entered into a new management agreement with Hurst Hospitality Inc., which manages three other economy hotels in Nova Scotia and New Brunswick.

As part of its review, DBRS analyzed the largest 15 loans in the pool, the three loans on the servicer’s watchlist and the shadow-rated loan, which comprise approximately 70.54% of the current pool balance.

For additional details on the DBRS viewpoint for this transaction, and for details on the largest loans in the pool and all of the loans on the servicer’s watchlist, please see the October 2012 Monthly Surveillance Report for this transaction, which will be published shortly.

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

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodologies are CMBS Rating Methodology (January 2012) and CMBS North American Surveillance Methodology (May 2011), which can be found on our website under Methodologies.

This rating did not include issuer participation and is based solely on publicly available information.