DBRS Confirms Ratings on Schooner Trust, Series 2007-8

DBRS Limited (DBRS) has today confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2007-8 issued by Schooner Trust, Series 2007-8:

-- Class A-2 at AAA (sf)
-- Class A-J at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at B (high) (sf)
-- Class G at B (low) (sf)
-- Class H at CCC (sf)
-- Class J at CCC (sf)
-- Class K at CCC (sf)
-- Class L at C (sf)
-- Class XC at C (sf)

DBRS has also retained the Negative trends on Classes F and G and has changed the trend on Class E to Stable from Negative. All other trends are Stable with the exception of Classes H, J, K, L and XC, which have ratings that do not carry trends.

The rating confirmations reflect the current overall performance of the transaction, which has experienced a collateral reduction of 59.4% since issuance as of the March 2017 remittance. DBRS has maintained the Negative trend assignments on Classes F and G to reflect increased risk surrounding the ongoing redevelopment of the Londonderry Mall (Prospectus ID#1; 21.1% of the current pool balance); the uncertainties surrounding the disposition of the specially serviced loan, Best Western Grand Mountain (Prospectus ID#18; 3.2% of the current pool balance); and the concentration of upcoming maturities. In DBRS’s analysis, the investment-grade classes have generally shown the propensity to withstand the elevated risks associated with the pool, supporting the Stable trend assignment for Class E.

All loans in the pool are scheduled to mature by June 2017 with a weighted-average (WA) debt service coverage ratio (DSCR) and exit debt yield of 1.41 times (x) and 14.1% (excluding one defeased loan), respectively. Over the past 12 months, 17 loans have left the trust, contributing to a principal paydown of $146.6 million. As of the March 2017 remittance, 29 loans remain in the pool with an aggregate outstanding principal balance of approximately $210.2 million. The largest 15 loans in the pool collectively represent 87.1% of the transaction balance and all of those loans (excluding one defeased loan) are reporting YE2015 financials, showing WA DSCR, exit yield and cash flow growth over the DBRS issuance figures of 1.42x, 14.4x and 9.0%, respectively.

As of the March 2017 remittance, there are 27 loans (representing 94.2% of the pool) on the servicer’s watchlist with most flagged for upcoming loan maturity as well as one loan in special servicing. The largest loan in the pool and on the watchlist, Londonderry Mall, is secured by a 775,000 square foot regional shopping centre in Edmonton, Alberta. The property is in the process of an extensive renovation that is not expected to be complete by the May 2017 maturity date. According to the servicer, the borrower may require a short-term extension to secure replacement financing.

The specially serviced loan, Best Western Grand Mountain, is secured by a limited-service hotel in Grande Cache, Alberta. The loan transferred to the special servicer with the April 2016 remittance and the YE2015 DSCR was reported at 0.59x with an occupancy rate of 43%, down from 62% at YE2014. According to the March 2017 servicer update, an offer of $5.2 million has been accepted for both the collateral hotel and an adjacent non-collateral property. Closing is expected by the end of April 2017. Based on the proposed allocation of the purchase price to the trust portion of the property, DBRS expects that a loss could be finalized in excess of $5.0 million.

DBRS has provided updated loan-level commentary and analysis for larger and/or pivotal watchlisted loans, specially serviced loans as well as 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.

The rating assigned to Class C materially deviates from the higher rating implied by the quantitative results and the rating assigned to Class F materially deviates from the lower rating 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 for Class C and F are warranted, given uncertain loan-level event risk.

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 principal methodologies are North American CMBS Rating Methodology (January 2017) and CMBS North American Surveillance (December 2016), which can be found on dbrs.com under Methodologies.

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