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

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

-- Class K from CCC (sf) to C (sf)
-- Class L from CCC (sf) to C (sf)

DBRS has also confirmed the ratings for 18 classes as follows:

-- Class A-1A 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 A-J at A (low) (sf)
-- Class B at BBB (sf)
-- Class C at BBB (low) (sf)
-- Class D at BB (low) (sf)
-- Class E at B (sf)
-- Class F at B (low) (sf)
-- Class G at CCC (sf)
-- Class H at CCC (sf)
-- Class J at CCC (sf)
-- Class M at C (sf)
-- Class N at C (sf)
-- Class X-1 at AAA (sf)
-- Class X-2 at AAA (sf)

Classes A-1A, A-3, A-4, A-AB, A-M, A-J, B, C, D, E, F, X-1 and X-2 have Stable trends.

In addition, DBRS has added Interest in Arrears to Classes J, K and L.

The downgrades reflect the current outlook for the seven loans, representing 2.94% of the outstanding pool balance, that are currently in special servicing, including the three loans that have transferred to special servicing over the past twelve months. Since issuance, there have been seven loans liquidated with cumulative losses of approximately $18.5 million, with a weighted-average loss severity of approximately 47% as of the April 2013 remittance report. The most recent loan liquidated was Prospectus ID #108, Union Walk, which was disposed at a loss of approximately $2.1 million and a loss severity of approximately 48% in January 2013.

The confirmations reflect the performance for the pool overall, which had a weighted-average DSCR of 1.50x and a weighted-average debt yield of 10.1% as of the April 2013 remittance report. Both of those figures are in line with the respective numbers at issuance. Since the transaction closed in 2007, there has been collateral reduction of 12.84%, with 186 of the original 209 loans remaining in the pool. There are four loans shadow-rated investment grade by DBRS, representing 27.7% of the outstanding pool balance. Those shadow ratings are generally based on strong credit metrics for the respective loans, and as those loans continue to perform as expected, the shadow ratings have been affirmed as part of this review. The pool also benefits from the defeasance in recent months of one of the largest loans in the pool, Prospectus ID #5 (The Shops at Biddeford Crossing), which represents 2.88% of the pool balance. The loan was previously secured by a shopping center and was on the watchlist for the loss of its anchor tenant, Lowes, well ahead of the scheduled lease expiry. A replacement tenant was recently secured and the property was sold with the trust loan fully defeased as part of the transaction.

The largest loan currently in special servicing is Prospectus ID #35 (Towne Center Promenade Shopping Center), which represents 0.95% of the pool and was transferred to special servicing in April 2012 for payment default. The loan is secured by an anchored shopping center located in the Chicago suburb of Deer Park, Illinois. The loan became delinquent in early 2012, and at the time the servicer advised that the property appeared to be cash flowing, but cited the borrower’s mishandling of the property’s revenues as the source of the delinquency. Since the loan’s transfer, the borrower has failed to bring the loan current and as of the April 2013 remittance report, the loan was due for the May 2012 payment and all payments due thereafter. In April 2013, the servicer reported the borrower’s advisory that a sale of the property had been executed and a discounted payoff was requested. Since that time, however, the sale has fallen through and the servicer reports that a foreclosure will be pursued. At issuance, the property was valued at $22.0 million and the September 2012 appraisal obtained by the special servicer valued the property at $15.5 million. Based on that value, the property’s strong tenant mix, which includes the anchor Dick’s Sporting Goods and several national restaurants and retailers, and the strong location near prominent shopping destinations in the area, DBRS anticipates any loss associated with liquidating the asset to be lower than historical loss rates for this pool. The loan had a balance of $14.8 million and outstanding advances of $1.13 million as of the April 2013 remittance report.

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 April 2013 Monthly Surveillance Report for this transaction will publish 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 and CMBS North American Surveillance Methodology, which can be found on our website under Methodologies.