DBRS Confirms All Classes of Morgan Stanley Capital I Trust, Series 2007-TOP27

DBRS has today confirmed the ratings of Morgan Stanley Capital I Trust, Series 2007-TOP27 as follows:

-- Classes A-2, A-3, A-4, A-AB, A-1A, A-M, A-MFL and X at AAA (sf)
-- Class A-J at A (sf)
-- Class B at BBB (low) (sf)
-- Class C at BB (low) (sf)
-- Class D at B (low) (sf)
-- Classes E and F at CCC (sf)
-- Class G at C (sf)

Classes A-2 through D, as well as Class X, carry Stable trends.

There are eight loans in special servicing, four of which have transferred to special servicing since the last full surveillance review. The largest loan in special servicing is Springfield Hotel Portfolio (III) (Prospectus ID#13, 1.57% of the current pool balance). This loan is secured by two neighboring hotels, a 288-room Crowne Plaza and a 140-room Holiday Inn Express in Springfield, Illinois. This loan transferred to special servicing when the borrower sent notification that it would be unable to secure refinancing ahead of the loan’s scheduled April 2012 maturity. Furthermore, the borrower has stated that it is unwilling or unable to fund additional capital for property improvement plan (PIP) work, and may not be able to extend the properties’ franchise agreements, which expire in 2013. The special servicer’s workout strategy is currently foreclosure. A December 2011 appraisal valued the properties together at $43.9 million, down from $64.0 million at issuance.

Two other loans in special servicing are of particular concern. The first is Grand Mart Chicago Portfolio (VII) (Prospectus ID#50, 0.61% of the current pool balance). This loan was originally secured by three stand-alone grocery stores in west suburban Chicago, and has been in special servicing since March 2009. The properties have been vacant for several years, and have fallen into disrepair and have been subject to vandalism and theft, according to the most recent servicer site inspections. One of the three collateral properties was sold in July 2012, and, according to an August 2011 appraisal, the two remaining properties are valued together at $4.1 million. The appraiser indicated that a significant amount of capital would be required to renovate the buildings. DBRS estimates that the loss on these properties will be significant.

Empire Towers (Prospectus ID#52, 0.61% of the current pool balance) is secured by a mixed-use office and retail property in Glen Burnie, Maryland. The loan transferred to special servicing in May 2009, and the lender took title of the asset in March 2012. A July 2012 appraisal valued the property at $5.6 million, down from $7.5 million as of August 2011 and $18.2 million at issuance.

In the last twelve months, six loans have liquidated from the pool, incurring a combined realized trust loss of $36.1 million. The weighted-average debt service coverage ratio (DSCR) and weighted-average debt yield for the pool overall is 1.6 times (x) and 10.2%, respectively. In comparison, the weighted-average DSCR and weighted-average debt yield for the pool at issuance were 1.7x and 10.4%, respectively.

In addition to the above-noted rating actions, DBRS has today confirmed the investment-grade shadow ratings for fourteen loans, representing 12.6% of the current pool balance.

As part of its review, DBRS analyzed the top 15 loans, loans in special servicing, large loans on the servicer’s watchlist and the shadow-rated loans, which together comprise approximately 61.3% of the current pool balance.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction, including details on the largest loans in the pool, the loans in special servicing and the loans on the servicer’s watchlist. The December 2012 Monthly Surveillance Report for this transaction will be published shortly. If you are interested in receiving this report, contact us at info@dbrs.com.

Notes:
All figures are in U.S. 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 (November 2012), which can be found on our website under Methodologies.