DBRS Downgrades Two Classes of BSCMS 2007-TOP26

DBRS has today downgraded two classes of Bear Stearns Commercial Mortgage Securities Trust, Series 2007-TOP26 and removed the interest in arrears designation from both of those classes, as follows:

-- Class F to D (sf) from C (sf)
-- Class G to D (sf) from C (sf)

The downgrades are a result of two liquidations that occurred with the July 2013 remittance report and ultimately caused losses to be realized by the trust. Two loans, Prospectus ID#25 – DRA Lake Emma Corporate Park and Prospectus ID#30 – 100 Challenger, were liquidated as of the July 2013 remittance report.

Prospectus ID#25 – DRA Lake Emma Corporate Park was secured by a low-rise office property featuring two Class B buildings that were originally constructed in 1975 and 1996. The properties are located in Lake Mary, Florida, which is a northern suburb of Orlando. AT&T was previously one of the sole tenants at the property, accounting for approximately 31% of the NRA. AT&T vacated at lease expiry in October 2009 and shortly thereafter the loan transferred to the special servicer. The asset has been REO since February 2012 and the special servicer was marketing the property for sale. The loan liquidated with the July 2013 remittance report at a loss of $9.0 million, slightly higher than the $8.2 million loss that was previously projected by DBRS. The variance in our loss projection can be attributed to the actual liquidation expenses being slightly higher than what DBRS had projected.

Prospectus ID#30 – 100 Challenger was secured by an office property in Ridgefield Park, New Jersey. The loan transferred to special servicing as a result of significant occupancy declines over time (from 90% down to 30%). The DBRS loss projection had contemplated a significant haircut to the appraised value of the asset from issuance, as the draft updated appraisal was under review at that time, and the figure was unable to be used in the DBRS loss projection. The DBRS loss projection also included inflated liquidation expenses. This resulted in a DBRS projected loss of $6.2 million, which is lower than the actual realized loss of $12.7 million. The reason for the variance can be attributed to the most recent appraised value coming in at $5.9 million, which is substantially lower than the DBRS projected value based on a haircut to the issuance appraised value.

Although these most recent losses were in excess of what DBRS had projected on a loan level, in aggregate, the DBRS projected losses for this transaction are in line with what has been realized by the trust to date. In aggregate, the DBRS cumulative loss projections for the loans in the transaction that have realized loss is 100.7% of the cumulative realized losses to date.

Further, of the few remaining loans in special servicing, many of the stories have improved over the past 12 months. Specifically, the largest loan in special servicing, Prospectus ID#7 909 A Street, has experienced significant leasing activity and is pending return to the master servicer. DBRS previously modeled a significant loss associated with this loan and intends to obtain all available information from the special servicer and re-evaluate the outlook and loss projection for this loan.

DBRS is in the process of gathering all information from and corresponding with the master and special servicer and intends to finalize a full annual surveillance review with the next remittance period.

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

The applicable methodology is CMBS Rating Methodology and CMBS North American Surveillance Methodology, which can be found on our website under Methodologies

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