DBRS Confirms 13 and Discontinues 12 Classes in Bear Stearns Commercial Mortgage Securities Trust 2007-PWR18

DBRS, Inc. (DBRS) has today confirmed the following classes of Bear Stearns Commercial Mortgage Securities Trust 2007-PWR18:

-- Classes X-1, X-2, A-1A, A-3, A-4 and A-AB at AAA (sf)
-- Classes A-M and AM-A at AA (low) (sf)
-- Classes A-J, AJ-A, B and C at CCC (sf)
-- Class D at C (sf)

DBRS has also discontinued the ratings for Classes E through Q, which were previously rated D (sf). As DBRS does not perform ongoing surveillance to defaulted classes, these ratings have been withdrawn. Classes X-1, X-2, A-1A and A-1A through AM-A remain on Stable trend.

The confirmations reflect the continued performance of the pool according to DBRS’s expectations. Since the last surveillance review, four loans have been liquidated, contributing $52.7 million to the $203.9 million in realized loss to the trust since the deal closed. The recent liquidations include Southlake Mall, which was previously the largest loan in special servicing. As of the January 2015 remittance, one loan remains in special servicing, with an outstanding principal balance of $8.1 million.

DBRS continues to monitor the post-modification performance of DRA/Colonial Office Portfolio (Prospectus ID#2, 12.2% of the current pool balance). Since the loan was modified, the borrower has released five properties from the collateral, an increase in three property releases since the last surveillance review. Proceeds from the property sales have been used to pay down the loan’s outstanding principal trust balance by $62.7 million and fund the Master Account, which is utilized for TI/LC expenditures and funding operating shortfalls. Occupancy for the portfolio remains below 90.0% and the loan is being kept on the servicer’s watchlist for a low debt service coverage ratio (DSCR), reported to be 0.93 times (x) for YE2013, down from 0.99x for YE2012.

DBRS also remains concerned with two large loans in the transaction that are on the servicer’s watchlist. Trumbull Marriott (Prospectus ID#16, 1.9% of the current pool balance) is secured by a 323-room full-service Marriott hotel in Trumbull, Connecticut, a one hour drive from New York City. The loan has been on the servicer’s watchlist since April 2010 for a low DSCR. The YE2013 DSCR is flat at 0.39x from the YE2012 DSCR of 0.37x, but down significantly from 1.05x at YE2011 and 0.73x at YE2010. Although the borrower continues to invest money into the property, the continued lack of real cash flow growth could indicate increased potential for default. Ingram Festival Shopping Center (Prospectus ID#20, 1.7% of the current pool balance) is secured by an anchored retail property in San Antonio, Texas, and has been on the servicer’s watchlist since February 2010. The subject was previously anchored by Best Buy, which vacated its space (21.5% of the NRA) after its lease expired in January 2011. JC Penney Home, representing 19.0% of the NRA, also vacated the property following its October 2013 lease expiration, bringing the property’s occupancy down to 67.1%. DSW and Ulta have since leased portions of the space previously occupied by Best Buy; however, according to the most recent rent roll, the new tenants were given free rent periods, so it is unlikely that the property’s performance will see marked immediate improvement. Although the loan is not scheduled to mature until December 2017, the current debt yield of 4.8% and Refinance DSCR of 0.61x could make refinancing the loan a challenge. The asset is located adjacent to Ingram Park Mall, and remaining major tenants include Marshalls, Michael’s, Old Navy and Barnes & Noble.

DBRS maintains an investment-grade shadow rating on one loan in the pool, Stor-It Self Storage (Prospectus ID#112, 0.3% of the current pool balance). DBRS has today confirmed this shadow-rating in conjunction with the above rating actions.

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 January 2015 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 methodology is CMBS Rating Methodology (January 2012) and CMBS North American Surveillance (January 2015), which can be found on our website under Methodologies.

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