DBRS Downgrades Four and Confirms 12 Classes of Bear Stearns Commercial Mortgage Securities Trust, Series 2007-TOP28

DBRS Limited (DBRS) has today downgraded the ratings on four classes of Bear Stearns Commercial Mortgage Securities Trust, Series 2007-TOP28 as follows:

-- Class D to B (high) (sf) from BB (low) (sf)
-- Class E to CCC (sf) from B (sf)
-- Class F to CCC (sf) from B (low) (sf)
-- Class G to C (sf) from CCC (sf)

In addition, DBRS has confirmed Class A-3 through Class C, Class H, Class J and the notional Classes X-1 and X-2. All trends are Stable, with the exception of Class E through Class J, which have ratings that do not carry trends. Class F through Class J continue to have Interest in Arrears. DBRS does not rate the first loss piece, Class P.

The rating downgrades of Class D through Class G reflect both the realized losses occurring in the April 2015 remittance report, following the liquidation of River Center I & II (Prospectus ID#4) as well as the increased projected losses associated with the four loans currently in special servicing. River Center I & II was secured by two Class A office towers, which were built in 1990 and 1998, comprising approximately 557,000 sf. The buildings are located in Covington, Kentucky, overlooking the Ohio River from Cincinnati, Ohio. The loan transferred to special servicing in May 2014 due to maturity default, and the loan was liquidated from the pool in the April 2015 via a discounted payoff, resulting in a realized trust loss of $18.3 million. To date, the aggregate realized loss to the trust totals $50.6 million as a result of 13 loan liquidations.

Since issuance, the transaction has experienced collateral reduction of 19.4%. As of the April 2015 remittance, 174 loans currently remain in the pool of the original 209 with a weighted-average debt service coverage ratio (DSCR) of 1.5 times (x) and a weighted average debt yield of 10.5%. The transaction benefits from two fully defeased loans, which represent 3.8% of the current pool balance. However, the pool is concentrated by property type, as loans secured by retail properties represent 42.7% of the current pool balance. There are currently four loans in special servicing and 48 loans on the servicer’s watchlist, representing 2.0% and 18.3% of the current pool balance, respectively. The two largest loans in special servicing are highlighted in detail below.

Towne Center Promenade Shopping Center (Prospectus ID #35, 1.0% of the current pool balance) is secured by an anchored shopping center located in the northwestern Chicago suburb of Deer Park, Illinois. This loan transferred to special servicing in April 2012 due to payment default and is now real estate owned by the lender. The property is located within a highly travelled retail hub near the popular Deer Park Town Center; however, it has experienced continued cash flow decline in recent years. Although the property was 90.5% occupied in December 2014 with almost no tenant rollover through 2015, the annualized Q3 2014 DSCR was reported to be 0.56x, compared to 1.12x at issuance. The three largest tenants include Dick’s Sporting Goods (67% of the NRA through 01/2017), Livingston Kitchen Design (5.6% of the NRA through 11/2018) and AT&T (5.3% of the NRA through 05/2017). A July 2014 appraisal valued the property at $13.7 million, down from an issuance value of $22.0 million. The current trust balance is $14.4 million; however, there is approximately $2.9 million in servicer advances and fees outstanding. As a result, DBRS expects the trust to experience a loss with the resolution of this loan.

Cooper Crossing Shopping Center (Prospectus ID#64, 0.6% of the current pool balance) is secured by a four-building, grocery-anchored retail center totaling 86,175 sf located in Arlington, Texas. The loan was previously in special servicing and modified with an extended maturity date. The loan failed to pay off its remaining unpaid balance in accordance with the modified April 1, 2015, maturity date and transferred to special servicing with the April 2015 remittance. According to the May 2014 rent roll, the property was 92% occupied and anchored by Tom Thumb (72.5% of the NRA through 12/2023). DBRS will continue to track the resolution process of this loan.

DBRS maintains investment-grade shadow ratings on three loans in the transaction, Easton Town Center (Prospectus ID# 1, 11.9% of the current pool), 3 Penn Plaza (Prospectus ID# 2, 7.6% of the current pool) and Northwest Marketplace (Prospectus ID# 16, 1.4% of the current pool). DBRS has today confirmed that the performance of these loans is consistent with investment-grade loan characteristics.

As part of its review, DBRS analyzed the top 15 loans, the loans on the servicer’s watchlist, the specially serviced loan and shadow-rated loans, which represent 64% 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 largest loans in the pool, the loans in special servicing and the loans on the servicer’s watchlist. The April 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 methodologies are CMBS Rating Methodology (January 2015) and CMBS North American Surveillance Methodology (March 2015), 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.