DBRS Upgrades Two Classes of Morgan Stanley Capital I Trust, Series 2007-TOP27

DBRS Limited (DBRS) has today upgraded two classes of Commercial Mortgage Pass-Through Certificates, Series 2007-TOP27 issued by Morgan Stanley Capital I Trust, Series 2007-TOP27 as follows:

-- Class A-M to AA (sf) from A (high) (sf)
-- Class A-MFL to AA (sf) from A (high) (sf)

In addition, DBRS has confirmed the remaining classes in the transaction as follows:

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

All trends are Stable, with the exception of Class D, which carries no trend.

The rating upgrades and confirmations reflect the overall stability of the pool, which has experienced a collateral reduction of 34.9% since issuance, as a result of scheduled loan amortization, successful loan repayments, and the principal recovered and losses realized from liquidated loans. As of the December 2016 remittance report, 152 loans remain in the pool out of the original 225 loans. In the last 12 months, the collateral has been reduced by 3.0%, with 18 small loans repaying in full. There are currently 25 loans, representing 18.1% of the pool, including two in the Top 15, that are fully defeased. Furthermore, there are 149 loans, representing 87.0% of the current pool, including all the defeased loans, scheduled to mature in 2017.

The overall credit profile for the 2017 maturities, which are generally scheduled for the first half of the year, is relatively healthy. Those non-defeased loans report a weighted-average (WA) DBRS refinance debt service coverage ratio (DSCR) of 1.38 times (x) and a WA exit debt yield of 11.5%. The WA net cash flow growth for the 13 largest non-defeased loans in the Top 15 reporting YE2015 figures was 16.2% over the YE2014 figures, with a WA DSCR of 1.68x and WA debt yield of 10.4%. Additionally, partial-year reporting for 2016 shows cash flows are generally stable from YE2015 for those loans.

According to the December 2016 remittance report, there are 37 loans, representing 19.4% of the pool, on the servicer’s watchlist. A large majority of these loans are on the watchlist solely for upcoming maturities, with the reported DSCR figures showing stable performance in general. Some loans, including two loans in the Top 15 (Prospectus ID #10, Parkshore Plaza I and Prospectus ID #24, Residence Inn – Herndon) that cumulatively represent 3.8% of the pool, are also on the watchlist for a low DSCR. Those loans were modeled with a stressed cash flow to reflect the increased risk and will be monitored closely by DBRS through maturity for developments.

There is one loan, Prospectus ID #28, Towne Square Mall, representing 1.3% of the pool, in special servicing. DBRS modeled losses for this loan based on the most recent appraisal received, with an implied loss severity approaching 100%.

The rating assigned to Class A-J materially deviates from the higher ratings implied by the quantitative results. DBRS considers a material deviation to be a rating differential of three or more notches between the assigned rating and the rating implied by the quantitative results that is a substantial component of a rating methodology. The deviations are warranted due to the sustainability of loan performance trends not demonstrated.

DBRS has provided updated loan-level commentary and analysis for the specially serviced loan, larger and/or pivotal watchlisted loans and for the largest 15 loans in the pool, in the DBRS CMBS IReports platform. To view these and future loan-level updates provided as part of DBRS’s ongoing surveillance for this transaction, please log into DBRS CMBS IReports at www.ireports.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 2016) and CMBS North American Surveillance (December 2016), which can be found on our website under Methodologies.

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