DBRS Downgrades All Classes of Bear Stearns Commercial Mortgage Securities Trust, Series 2007-TOP28

DBRS Limited (DBRS) downgraded all classes of the Commercial Mortgage Pass-Through Certificates, Series 2007-TOP28 issued by Bear Stearns Commercial Mortgage Securities Trust, Series 2007-TOP28 as follows:

-- Class B at BB (high) from BBB (sf)
-- Class C at C (sf) from BBB (low) (sf)
-- Class D at C (sf) from B (high) (sf)
-- Class E at C (sf) from CCC (sf)
-- Class F at C (sf) from CCC (sf)

The trend on Class B is Stable. Classes C through F have ratings that do not carry trends.

The rating actions reflect the DBRS outlook for the remaining loans in the transaction, which has seen a collateral reduction of 93.7% since issuance. As of the March 2018 remittance, the Trust has a current balance of $111.5 million, with just five of the original 209 loans remaining in the pool. Four of those five remaining loans, representing 87.8% of the pool balance, are in special servicing for maturity default after missing scheduled maturity dates in August and September of last year. DBRS anticipates that the cumulative losses that will be realized when these loans are liquidated could flow all the way up into Class C, supporting the rating downgrades for the Class C, D, E and F Certificates.

Given the paydown, the pool is concentrated by loan size, with the three largest loans representing 94.9% of the total pool balance. Three of the three largest loans in the pool are in special servicing, including the Charleston Town Center loan (Prospectus ID #3, 82.6% of the pool), the Castaic Creek Plaza loan (Prospectus ID #74, 6.2% of the pool) and Hampton Inn – St. Clairsville (Prospectus ID #68, 6.0% of the pool). Given the remaining balance of the overall pool, the analysis for the Charleston Town Center loan is the primary driver for these rating actions.

The Charleston Town Center loan is secured by a 363,000 square foot (sf) portion of a 782,720 sf enclosed mall located in downtown Charleston, West Virginia. The loan sponsor, Forest City, was unable to sell the property or repay the loan at the September 2017 maturity because of precipitous performance declines for the collateral over the last several years. In early 2017, the property’s non-collateral anchor Sears was closed, and later that year the sponsor reached an agreement with Macy’s (also non-collateral) to remain in place through 2019, with the sponsor paying the company a regular stipend as part of the agreement. Now that the loan has defaulted and a receiver is in place, the special servicer reports the stipend payments to Macy’s will cease and as a result, the store is expected to close in the near term. As a result, the only remaining anchor will be a non-collateral JCPenney store. This will bring the property’s occupancy rate down to approximately 50%, with cash flows further declining as approximately 30 tenants, with 32.1% of the collateral NRA, have co-tenancy clauses allowing for reduced rents in the event Macy’s closes.

The special servicer expects foreclosure to occur by mid-2018. An updated appraisal has not been finalized, but given the sharp occupancy declines and projected further declines in cash flows, DBRS expects the value has drastically fallen and assumes a loss in excess of 80% in the analysis for this review. Overall, the DBRS analysis approach for the remaining loans in the pool suggests losses will be contained to the Class C and below Certificates; however, the dire outlook for the Charleston Town Center loan and a few other specially serviced loans suggest the prospects for principal recovery could diminish over the near to medium term, supporting the rating downgrade for the Class B Certificates. For additional commentary and analysis on the specially serviced loans in the pool, please see the DBRS Viewpoint platform, for which information is provided below.

All ratings will be subject to ongoing surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

As part of this review, DBRS has provided updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Charleston Town Center (Prospectus ID #3; 82.6% of the pool balance)
-- Castaic Creek Plaza (Prospectus ID #74; 6.2% of the pool balance)
-- Hampton Inn – St. Clairsville (Prospectus ID #6; 6.0% of the pool balance)
-- Walgreens Westford (Prospectus ID #100; 4.2% of the pool balance)
-- Shadow Hills Shopping Center (Prospectus ID #203; 0.8% of the pool balance)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for the entire CMBS universe, as well as deal and loan-level commentary for all DBRS rated transactions.

The ratings assigned to Class B materially deviate 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 given uncertain loan-level event risk.

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.

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