DBRS Confirms All Classes of Morgan Stanley Capital I Trust, Series 2007-TOP25

DBRS has today confirmed all classes of Morgan Stanley Capital I Trust, Series 2007-TOP25 as follows:

-- Classes A-1A, A-3, A-AB and X at AAA (sf)
-- Class A-M at AA (sf)
-- Class A-J at BBB (low) (sf)
-- Class B at B (sf)
-- Class C at B (low) (sf)
-- Class D at CCC (sf)
-- Class E at C (sf)

The rating for Class A-2 has been discontinued as the class has been repaid in full. Trends for Classes A-1A through B are Stable. The trend on Class C has been changed to Negative.

The confirmations are a result of the continuation of expected performance for a majority of loans in the pool. In the last twelve months, ten loans have repaid, resulting in $92.4 million of principal paydown. This paydown recently contributed to the full repayment of Class A-2. As of the November 2013 remittance, the weighted-average debt-service coverage ratio (DSCR) and the weighted-average debt yield for the pool were 1.7 times and 11.2%, respectively.

With this review, DBRS is projecting additional realized losses following the January 2013 transfer of Giant Eagle Plaza (Prospectus ID#93, 0.3% of the current pool balance) to special servicing, as well as the potential transfer to special servicing of Providian Bancorp Office/Data Center (Prospectus ID#15, 1.6% of the current pool balance). As a result of increase in expected losses, DBRS has assigned a Negative trend to Class C.

Giant Eagle Plaza is secured by a grocery-anchored retail property outside of Erie, Pennsylvania. The loan transferred to special servicing in January 2013 following the grocery-anchor’s departure. The property is currently 23% occupied and as a result, the most recent appraisal reflects substantial deterioration to property value. If the borrower is unsuccessful in leasing the space, the loss severity on this loan could be significant.

Providian Bancorp Office/Data Center is secured by an office property in Arlington, Texas, that was previously 100% occupied by JP Morgan Chase (Chase). Chase vacated the property upon lease expiration in August 2013. The property is currently vacant and is being marketed for lease on CoStar at $9.50 per square foot. Given the higher potential for default, DBRS expects this loan may transfer to special servicing soon. If the borrower is not successful in leasing at least a portion of the property, the property value is likely to drop, indicating potential for a realized loss. DBRS derived a property value based on an income analysis that assumed the asking rental rate, a stressed market vacancy of 25% and the asset’s historical reimbursements and expenses, which also support the likelihood for value decline.

DBRS is currently monitoring Romeoville Towne Center (Prospectus ID#16, 1.5% of the current pool balance), as it was recently announced that the anchor tenant could become vacant in the near future. This loan is secured by a retail property anchored by a Dominick’s Finer Foods (Dominick’s) grocery store and is located in a southwestern Chicago suburb. Safeway Inc. (Safeway), Dominick’s parent company, recently announced that it will be pulling out of the Chicago market, and plans to close or sell its 72 Dominick’s stores in the area by early 2014. Other grocery chains active in the Midwest – Mariano’s Fresh Market and Jewel-Osco – have made public their plans to purchase a number of these stores or assume the leases; however, the subject property has not been identified as a takeover location as of this publication date. The lease to Safeway does not expire until February 2019, two years after the loan’s scheduled maturity date. Per the servicer, the tenant will be required to continue paying rent should it cease business operations at the property. This loan has been on the watchlist since September 2012 for a decline in cash flow.

In addition to the above mentioned rating actions, DBRS has also today confirmed the investment-grade shadow-ratings of six loans, representing 6.9% 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 remaining loans in the pool. The December 2013 Monthly CMBS 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.

The applicable methodology is CMBS Rating Methodology (January 2012) and CMBS North American Surveillance Methodology (November 2012), which can be found on our website under Methodologies.

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