DBRS Downgrades Two Classes and Places Four Under Review with Negative Implications in Morgan Stanley Capital I Trust, Series 2007-TOP27

DBRS has today downgraded Classes A-M and A-MFL of Morgan Stanley Capital I Trust, Series 2007-TOP27 to A (high) (sf) from AAA (sf). The downgrades follow the liquidation of Grand Mart Chicago Portfolio (Prospectus ID#50) from the trust with the September 2014 remittance. Classes A-M and A-MFL were shorted interest payments for the September 2014 period in relation to the liquidation. The downgrades do not reflect a lack of sufficient credit support, but rather the perceived propensity for interest payments to be withheld from these classes in the future. The increase of interest shortfalls and recent transfer of one loan to special servicing have contributed to DBRS’s decision to place Classes A-J, B, C and D Under Review with Negative Implications. In addition, Class A-M through Class D have been assigned the Interest in Arrears designation.

Grand Mart Chicago Portfolio was originally secured by three standalone grocery stores located in Aurora, Bridgeview and Joliet, Illinois, all within the Chicago Metropolitan Statistical Area. The properties were previously occupied by Cub Foods, which had vacated all three of the locations by May 2009. The loan was declared non-recoverable for future advances in October 2010, and the properties became real estate owned in December 2010. The assets were sold separately after having declined significantly in value as a result of exposure and vandalism. The resulting loss severity was 140.5% of the loan balance, which further reduced the outstanding principal balance of Class G, already rated D (sf) by DBRS. Accrued interest on the non-recoverable advances totaled approximately $3.4 million at the time of liquidation, and the total deficiency applied to interest payments was $5.7 million. The full interest payment to Class A-MFL was held back, while Class A-M was shorted 25.2% of its interest distribution. DBRS does not have any tolerance for untimely interest payments on AAA-rated classes, while tolerance for missed interest payments on A-rated classes is one to two months.

One loan recently transferred to special servicing, for a total of three specially serviced loans remaining in the pool, with a combined outstanding principal balance of $68.3 million. The two largest loans in special servicing are Springfield Hotel Portfolio (Prospectus ID#13, 1.8% of the current pool balance) and 791 Park of Commerce (Prospectus ID#21, 1.4% of the current pool balance). Sportsman’s Warehouse (Prospectus ID#153, 0.2% of the current pool balance) transferred to special servicing in July 2014 for imminent default. Springfield Hotel Portfolio is real estate owned, and the workout strategy for 791 Park of Commerce and Sportsman’s Warehouse is currently foreclosure. None of the loans in special servicing have been deemed non-recoverable for future advances as of the September 2014 remittance. DBRS plans to perform a full surveillance review of this transaction in the coming months, at which time further determination of the previously noted classes placed under review will be made.

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 September 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 U.S. dollars unless otherwise noted.

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.

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

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.