DBRS Confirms All Classes of Bear Stearns Commercial Mortgage Securities Trust, Series 2007-TOP26

DBRS Limited (DBRS) confirmed all classes of the Commercial Mortgage Pass-Through Certificates, Series 2007-TOP26 issued by Bear Stearns Commercial Mortgage Securities Trust, Series 2007-TOP26 (the Trust) as follows:

-- Class AM at AAA (sf)
-- Class A-J at C (sf)
-- Class B at C (sf)
-- Class C at C (sf)
-- Class D at C (sf)

DBRS maintained the Interest in Arrears designation for Classes A-J, B, C and D. None of the Classes have ratings that carry trends with the exception of Class AM, which carries a Stable trend.

The rating actions are largely reflective of DBRS’s outlook for the second-largest loan remaining in the pool, One AT&T Center (Prospectus ID#2, 35.4% of the pool), which is secured by a 1.5 million square foot office building in downtown St. Louis, Missouri, and has been in default since May 2017. In addition, as of the April 2019 remittance, the largest loan in the pool, One Dag Hammarskjold Plaza (Prospectus ID#1, 49.5% of the pool), has been fully defeased. Given the combined loan balance, the outlook for the remaining Classes hinges directly on these two loans.

As of the April 2019 remittance, there has been a collateral reduction of 85.6% since issuance because of scheduled loan amortization, repayments and liquidations. Of the original 237 loans secured at issuance, there are only 12 loans remaining in the pool, with an outstanding principal balance of $303.1 million. There are two loans, representing 2.1% of the pool, on the servicer’s watchlist, and five loans, representing 45.8% of the pool, in special servicing. The largest specially serviced loan, One AT&T Center, was transferred to the special servicer in May 2017. This turn of events had been anticipated for several years given the building’s largely dark status for several years prior to the transfer after the single tenant, AT&T, began moving employees from the building to another location nearby. The building remains vacant and is real estate owned, with the special servicer working to sell the property through an auction that was scheduled to conclude in April 2019. According to the May 2018 appraisal, the property was valued at $21.1 million, well below the issuance value of $207.0 million. The limited parking at the property will continue to be a hurdle, and a potential buyer would need to incur significant capex to sufficiently redevelop the property in order to re-lease it. Given the drastic value decline and the property’s fully vacant status that has held over several years, DBRS expects this loan to be disposed from the Trust at a loss severity approaching 100%. For additional information on this loan, please see the loan commentary on the DBRS Viewpoint platform, for which information is provided below.

In anticipation of One AT&T Center’s eventual liquidation, along with potential losses stemming from the resolution of the four other specially serviced loans, DBRS expects Classes B, C, D and unrated E to be completely wiped out, with additional losses flowing through into Class A-J. However, as One Dag Hammarskjold Plaza is fully defeased and has a current trust balance of $150.0 million, Class AM will be fully insulated from potential losses, supporting the confirmation of the AAA (sf) rating for that Class.

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

DBRS provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#2 – One AT&T Center (35.4% of the pool)
-- Prospectus ID#55 – Indrio Crossings Shopping Center (2.9% of the pool)

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 most outstanding CMBS transactions (including non-DBRS rated), as well as loan-level and transaction-level commentary for most DBRS-rated and -monitored transactions.

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

The principal methodology is North American CMBS Surveillance Methodology, which can be found on www.dbrs.com under Methodologies & Criteria. 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, which can be found on www.dbrs.com in the Commentary tab under Regulatory Affairs. 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.

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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

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

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