DBRS Downgrades Rating on Two Classes of BSCMS 2007-T28

DBRS Limited (DBRS) has today downgraded ratings on two Classes of BSCMS 2007-T28 as follows:

-- Class H to D (sf) from C (sf)
-- Class J to D (sf) from C (sf)

In conjunction with the downgrades, DBRS has discontinued the rating to Class A-3, as it has been fully repaid, and removed the Interest in Arrears designations on Classes H, J, F and G.

The downgrades follow the liquidation of one loan from the pool with the April 2015 remittance. The River Center I & II was secured by two Class A office towers built in 1990 and 1998, consisting of approximately 557,000 sf located in Covington, Kentucky, which overlooks the Ohio River from Cincinnati, Ohio. The loan was transferred to special servicing in May 2014 due to maturity default. The $65 million whole loan consisted of a $55 million A-note, a $10 million B-note and was IO for the entire ten-year term. The Northern Kentucky CBD, which consists of four Class A office buildings (including the two subject buildings) has recently displayed very little leasing action in regards to large quantities of space, as larger tenants have been drawn across the river to the Cincinnati CBD. According to the July 2014 appraisal, the property was valued at $32.5 million, compared to $90 million at issuance. The appraiser noted that the decline was based on market conditions and in line with recent comparable sales in the immediate area.

The loan was liquidated from the pool with April 2015 remittance 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. The realized trust loss eliminated the remaining balance of Class K, already Discontinued/Withdrawn by DBRS, fully eroded the principle of Class J and reduced the principle balance of Class H by 61.6%. As of the April 2015 remittance, 174 loans currently remain in the pool of the original 209, with a weighted-average DSCR of 1.5x 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. There are currently three loans in special servicing and 48 loans on the servicer’s watchlist, representing 1.4% and 18.3% of the current pool balance, respectively.

The largest loan in special servicing, the Town 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. 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. This loan transferred to special servicing in April 2012 due to payment default and is now real estate owned (REO) by the lender. 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 January 2017), Livingston Kitchen Design (5.6% of the NRA through November 2018) and AT&T (5.3% of the NRA through May 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.

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 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 related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodologies are North American CMBS Rating Methodology (March 2015) 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.

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