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

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

-- Class A-M at AAA (sf)
-- Class A-J at C (sf)
-- Class B at C (sf)
-- Class C at C (sf)

DBRS Morningstar maintained the Interest in Arrears designation for Classes A-J, B, and C. Class A-M has a Stable trend and is the only class with a rating that carries a trend.

The rating actions are largely reflective of DBRS Morningstar’s outlook for the largest and second-largest loans remaining in the pool. The largest loan in the pool, One Dag Hammarskjöld Plaza (Prospectus ID#1; 56.7% of the pool), has been fully defeased as of the April 2019 remittance. The second-largest loan, One AT&T Center (Prospectus ID#2; 40.5% of the pool), is secured by a 1.5 million-square-foot office building in Downtown St. Louis and has been in default since May 2017. Given the combined loan balance that represents over 97.0% of the pool balance, the overall outlook hinges directly on these two loans.

As of the March 2020 remittance, there had been a collateral reduction of 87.4% since issuance because of scheduled loan amortization, repayments, and liquidations. Of the original 237 loans secured at issuance, there are only seven loans remaining in the pool, with an outstanding principal balance of $264.6 million. There were no loans on the servicer’s watchlist, and one loan, representing 40.5% of the pool, in special servicing.

The specially serviced loan, One AT&T Center, was transferred to the special servicer in May 2017. The building remains vacant and is real estate owned, with the special servicer working to sell the property through a second auction that was scheduled to conclude in April 2020 after the April 2019 auction failed to secure a buyer. According to the most recent finalized appraisal from May 2018, 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 capital expenditures to sufficiently redevelop the property in order to re-lease it. Given the drastic value decline from issuance and the property’s fully vacant status that has held over several years, DBRS Morningstar expects this loan to be disposed from the Trust at a loss severity possibly exceeding 100.0%. 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, DBRS Morningstar expects remaining Classes B and C to be completely wiped out, with additional losses flowing through into Class A-J. However, as One Dag Hammarskjöld Plaza is fully defeased and has a current trust balance of $150.0 million, Class A-M will be fully insulated from potential losses, supporting the confirmation of the AAA (sf) rating for that class.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at https://www.dbrsmorningstar.com/research/357792.

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

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

-- Prospectus ID#2–One AT&T Center (40.5% of the pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com The platform includes issuer and servicer data for most outstanding commercial mortgage-backed security transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is the North American CMBS Surveillance Methodology, which can be found on dbrsmorningstar.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 Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

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 [email protected].

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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 note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar 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.dbrsmorningstar.com or contact us at [email protected].

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577