DBRS Downgrades One Class of Morgan Stanley Capital I Trust, Series 2007-TOP25

DBRS Limited (DBRS) downgraded one class and confirmed two classes of the Commercial Mortgage Pass-Through Certificates, Series 2007-TOP25 (the Certificates) issued by Morgan Stanley Capital I Trust, Series 2007-TOP25 (the Trust) as follows:

-- Class A-J confirmed at BBB (low) (sf)
-- Class B confirmed at B (sf)
-- Class C downgraded to C (sf) from CCC (sf)

All trends are Stable with the exception of Class C, which has a rating that does not carry a trend.

The rating actions reflect DBRS’s views on the outlook for the remaining loans in the transaction, which has seen a collateral reduction of 91.7% since issuance. As of the February 2018 remittance, the Trust has a current balance of $129.5 million, with 12 of the original 204 loans remaining in the pool. There are four loans, representing 74.9% of the pool balance, in special servicing for maturity default. Those loans matured between September 2016 and January 2017. They include the largest loan in the pool, Prospectus ID#3, Shoppes at Park Place (54.8% of the pool balance). DBRS anticipates that the cumulative losses that will be realized when these loans are liquidated could approach or bleed into Class C, which will support the rating downgrade for that transaction with this review.

Given the paydown, the pool is concentrated by loan size, with the three largest loans representing 71.8% of the total pool balance. Two of the three largest loans in the pool are in special servicing, including the aforementioned Shoppes at Park Place loan and Prospectus ID#16, Romeoville Towne Center (14.1% of the pool). Both loans are secured by retail properties, and both loans matured in 2017.

The Shoppes at Park Place loan is secured by a Target shadow-anchored retail center in Pinellas Park, Florida, and was transferred to the special servicer after the loan failed to repay at the January 2017 maturity date. The property’s performance is healthy, with a YE2016 debt-service coverage ratio of 1.29 times and an occupancy rate that has consistently held near 100% for the last few years. The difficulty in securing a refinance appears to be the result of the sponsor’s poor credit history, as a February 2017 appraisal obtained by the special servicer indicates an as-is value of $105.0 million, compared with the current trust exposure of approximately $73.0 million. DBRS expects the resolution for this loan to be relatively positive, given the healthy occupancy rate at the property, its strong location and property valuation that suggests a successful refinance is possible. Given the general unknowns, however, DBRS assumed a stressed value of approximately $66.0 million in its analysis for this loan as part of this review and will continue to monitor closely for developments.

The outlook for the second-largest loan in special servicing, Romeoville Towne Center, is less rosy, however. That loan is secured by a grocery-anchored shopping center in the Chicago suburb of Romeoville, Illinois. The loan transferred to special servicing in 2014 when the sponsor requested relief following the loss of Dominick’s, the property’s grocery anchor that was closed in 2013 as part of the closure of all of the chain’s stores located throughout the Chicago area. As of October 2017, the physical occupancy rate for the property was reported at 32.0%, and an October 2017 appraisal estimated the property’s as-is value at $9.6 million, which was well below the total exposure for the Trust of approximately $19.5 million. DBRS analyzed the loan with a loss severity in excess of 70.0% as part of this review.

The non-specially serviced loans in the pool are generally diversified in terms of property type and location. Most are performing well, with two loans representing 5.9% of the pool on the servicer’s watchlist for low coverage ratios. Most of the performing loans are scheduled to mature in 2021, with a few loans scheduled to pay out in 2026. There is one defeased loan, Prospectus ID #189, 40th Street Medical Plaza (0.41%) of the pool.

As part of this review, DBRS provided updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:
-- Prospectus ID#3 - Shoppes at Park Place
-- Prospectus ID#16 - Romeoville Towne Center
-- Prospectus ID#57 - Timber Crest
-- Prospectus ID#62 - Office Depot – Paramus
-- Prospectus ID#80 - Pleasant Grove Marketplace
-- Prospectus ID#134 - Steeplechase Crossing

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Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is CMBS North American Surveillance, which can be found on dbrs.com under Methodologies. For a list of the Structured Finance related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document on www.dbrs.com. Please note that not every related methodology listed under a principal Structured Finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

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 under Related Documents or by contacting us at info@dbrs.com.

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

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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