DBRS Confirms Ratings of Schooner Trust, Series 2007-7

DBRS has today confirmed the ratings of the Schooner Trust, Series 2007-7 (the Trust) transaction as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 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 XC at AAA (sf)

All trends are Stable.

The rating confirmations reflect the pool’s continued stable performance as the transaction has experienced total collateral reduction of 25.6% since issuance. As of the June 2014 remittance report, there are 47 of the original 72 loans remaining in the pool. The transaction also benefits from defeasance collateral, as one loan, representing 2.3% of the current pool balance, is defeased. The pool is concentrated as the largest 15 loans represent 67.0% of the current pool balance. These loans are reporting a weighted-average debt yield of 12.7%.

There are eight loans on the servicer’s watchlist as of the June 2014 remittance report, representing 11.2% of the current pool balance. The two largest loans on the servicer’s watchlist are highlighted below.

The 3085 Hurontario loan (Prospectus ID #16), which represents 2.7% of the current pool balance, is secured by a mixed-use (office-retail) property in Mississauga, Ontario. The loan was added to the servicer’s watchlist after the YE2011 debt service coverage ratio (DSCR) declined to 0.74 times (x) due to a 17% increase in operating expenses and a drop in rental and reimbursement revenue. Property performance improved in 2012 due to a $100,000 increase in rental and reimbursement revenue, resulting in a year-end DSCR of 0.92x. Despite the low DSCR, the borrower has kept the loan current. The property is anchored by Yuan Ming grocery store, which occupies 24.0% of the NRA on a lease expiring in July 2017. According to the December 2012 rent roll, the property is 84% occupied.

The 8550, 8560 and 8564 Newman Boulevard loan (Prospectus ID #23), which represents 2.34% of the current pool balance, is secured by a two-storey office property in southwest Montréal near the town of LaSalle. The loan was added to the servicer’s watchlist after the YE2012 DSCR declined to 0.32x compared with 1.21x at YE2011. The decline was a result of a decrease of approximately $480,000 in EGI. Property performance rebounded in 2013 as the year-end DSCR improved to 0.94x as a result of a $420,000 increase in EGI. According to the March 2014 rent roll, the property is 84.6% occupied; however, 72.0% of the net rentable area (NRA) has leases expiring by YE2014. This includes the lease expiry of the largest tenant, CLSC de LaSalle, which holds 57.2% of the NRA. DBRS is awaiting an update on these expiring leases from the servicer.

DBRS maintains an investment-grade shadow rating on one loan in the transaction, representing 14.3% of the current pool balance. DBRS has today confirmed that the performance of this loan remains consistent with investment-grade loan characteristics.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction. The June 2014 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 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 (November 2012), which can be found on our website under Methodologies.