DBRS Changes Trend on One Class of Morgan Stanley Capital I Trust, Series 2007-TOP27

DBRS Limited (DBRS) changed the trend on the Commercial Mortgage Pass-Through Certificates, Series 2007-TOP27, Class C issued by Morgan Stanley Capital I Trust, Series 2007-TOP27 to Stable from Positive. The trend change is reflective of the lower recovery amount projected for the Residence Inn – Herndon (Prospectus ID#24, 10.7% of the pool) loan, which has showed a significant value decline in the last year.

DBRS also confirmed the ratings of all classes of the Commercial Mortgage Pass-Through Certificates, Series 2007-TOP27 as follows:

-- Class A-J at A (low) (sf)
-- Class B at BBB (sf)
-- Class C at B (low) (sf)

The trend on Class A-J remains Positive and the trend on Class B remains Stable.

Class A-J and Class B are expected to be insulated from losses incurred by the specially serviced loans and benefit from the strong performance of the largest loan in the pool, 360 Park Avenue South (Prospectus ID#1, 85.4% of the pool). This loan is secured by a Class B office property located in Manhattan, New York, that is fully leased to an investment-grade tenant and lease guarantor, RELX Group (formerly known as Reed Elsevier). RELX Group vacated the subject in Q3 2016 and the building has been subleased since that time. The RELX lease expires in December 2021, three months ahead of the scheduled March 2022 maturity date; however, DBRS believes the property is reasonably well-positioned to transfer to a multi-tenant lease structure given the healthy submarket metrics and lack of large blocks of space available for lease within the area. However, the trust’s exposure at maturity of $422 per square foot is slightly high, given the building’s Class B status and the possibility the in-place occupancy rate could be below market at maturity; as such, DBRS has analyzed the loan conservatively for the purposes of this review.

There are currently two loans in special servicing, representing 13.6% of the current pool balance. Both loans were transferred to special servicing for maturity default. In DBRS’s analysis for this review, DBRS assumed an average loss severity in excess of 75% for the specially serviced loans. The estimated losses for both loans are expected to be contained to the unrated Class D certificates.

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#1 – 360 Park Avenue South (85.4% of the pool)
-- Prospectus ID#24 – Residence Inn – Herndon (10.7% of the pool)
-- Prospectus ID#85 – 207 Tradewinds Blvd (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.

The ratings assigned to Class A-J and Class C are different than those implied by the analysis within the DBRS North American Direct Sizing Hurdles because of the loan level event risk associated with the two specially serviced loans and the slightly elevated maturity risk for the 360 Park Avenue South loan.

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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