DBRS Confirms Ratings of Morgan Stanley Capital I Trust, Series 2007-TOP27

DBRS Limited (DBRS) has today confirmed the ratings of the following classes of Commercial Mortgage Pass-Through Certificates, Series 2007-TOP27 (the Certificates) issued by Morgan Stanley Capital I Trust, Series 2007-TOP27 (MS 2007-TOP27 or the Trust):

--Class A-4 at AAA (sf)
--Class A-1A at AAA (sf)
--Class X at AAA (sf)
--Class A-M at A (high) (sf)
--Class A-MFL at A (high) (sf)
--Class A-J at BBB (high) (sf)
--Class B at BB (sf)
--Class C at B (low) (sf)
--Class D at CCC (sf)

In addition, DBRS has discontinued and withdrawn the ratings for Class E and Class F, as these classes have defaulted. All trends are Stable, with the exception of Class D, which has a rating that does not carry a trend.

The rating confirmations reflect the overall stability of the pool, which has experienced a collateral reduction of 31.0% as a result of scheduled loan amortization, successful loan repayments and the principal recovered and losses realized from liquidated loans. As of the December 2015 remittance report, 170 loans remain in the pool out of the original 225 loans. In the next 12 months, four loans, representing 0.7% of the current balance, are scheduled to mature. Based on the most recent year-end reporting, these loans have a weighted-average debt service coverage ratio (DSCR) and exit debt yield of 1.53 times (x) and 11.5%, respectively. The majority of the remaining loans in the pool, representing 85.7% of the current pool balance, will mature in 2017. The top 15 loans continue to exhibit stable performance, with a weighted-average DSCR and debt yield of 1.83 times (x) and 11.6%, respectively, based on the most recent year-end reporting available for the individual loans. In the last 12 months, eight loans have left the trust, contributing to a principal paydown of $130.1 million. Three of these loans were liquidated from the trust with a combined realized loss of $39.0 million. Eight loans, representing 7.2% of the current pool balance, are fully defeased.

According to the December 2015 remittance report, there are 45 loans on the servicer’s watchlist representing 19.6% of the current pool balance. Two of these loans, representing 6.6% of the pool balance, are in the top 15, with one of the loans flagged for non-performance-related reasons pertaining to deferred maintenance and the other flagged for declining cash flow. Since issuance, 23 loans have been liquidated from the trust at a combined realized loss of $137.6 million, with a weighted-average loss severity of 54.5%. Currently, one loan, representing 1.3% of the current pool balance, is in special servicing. DBRS modeled losses for this loan based on the most recent appraisal received, with an implied loss severity of 76.6%. The specially serviced loan is highlighted below.

The Towne Square Mall loan (Pros ID#28, representing 1.3% of the current pool balance) is secured by a regional mall in Owensboro, Kentucky. The loan transferred to special servicing in February 2015 for imminent default after the previous anchor tenant, Sears, vacated the subject in December 2014 as the subject was identified as one of approximately 80 stores to be closed in 2014. The tenant represented 34.2% of the NRA on a lease scheduled to expire in September 2016. Although the space is now dark, the tenant continues to make its rental payments, according to the servicer. An additional 16 in-line tenants have co-tenancy clauses with Sears; however, it is unclear at this time how many, if any, have executed these departure options. As of December 2015, the servicer has noted that the property will undergo foreclosure in January 2016. In addition to Sears’ departure, Body Central, representing 1.1% of the NRA, also discontinued its operations and vacated the subject in January 2015. The remaining tenancy at the property includes a non-collateralized Macy’s, JC Penney (representing 17.3% of the NRA, on a lease scheduled to expire in February 2018) and the in-line space, which consists mainly of local businesses with a few national tenants such as Bath & Body Works and American Eagle Outfitters, according to the September 2015 rent roll. Despite the elevated vacancy, the April 2015 site inspection shows the property in overall good condition with no deferred maintenance. The Q2 2015 DSCR has declined marginally to 0.80x, compared with the YE2014 DSCR of 0.89x and the YE2013 DSCR of 0.90x. An April 2015 appraisal indicates a value of $11.0 million ($31 psf), a $20.9 million decrease from the issuance value of $31.9 million. DBRS expects the trust will incur a loss with the resolution of the asset.

Ten loans are currently rated investment grade by DBRS. These loans are 485 Madison Avenue (Prospectus ID#9, 2.4% of the current pool balance), 161 William Street (Prospectus ID#15, 1.9% of the current pool balance), Lennox Town Center (Prospectus ID#26, 1.4% of the current pool balance), Eastlake Village Center (Prospectus ID#29, 1.2% of the current pool balance), Stuart Woods (Prospectus ID#41, 0.9% of the current pool balance), Arizona Self Storage Portfolio (Prospectus ID#43, 0.8% of the current pool balance), Sophie Plaza Apartments (Prospectus ID#48, 0.8% of the current pool balance), Birchwood Towers Cooperative (Prospectus ID#60, 0.6% of the current pool balance), 890 West End Avenue Cooperative (Prospectus ID#147, 0.2% of the current pool balance) and 247 West 35th Street (Prospectus ID#152, 0.2% of the current pool balance). DBRS has today confirmed that the performance of these loans remain 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 December 2015 Monthly CMBS 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.

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

The applicable methodologies are North American CMBS Rating Methodology (June 2015) and CMBS North American Surveillance (January 2015), which can be found on our website under Methodologies.

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