DBRS Morningstar Confirms Rating on Remaining Class of Morgan Stanley Capital I Trust, Series 2007-TOP25

DBRS Limited (DBRS Morningstar) confirmed the rating on the following class of Commercial Mortgage Pass-Through Certificates, Series 2007-TOP25 issued by Morgan Stanley Capital I Trust, Series 2007-TOP25:

-- Class C at C (sf)

Class C has a rating that generally does not carry a trend in commercial mortgage-backed securities (CMBS) ratings. Since DBRS Morningstar’s last rating actions for this deal in February 2022, Classes A-J and B have repaid in full as a result of the repayment of the Shoppes at Park Place loan (Prospectus ID#3; formerly 77.2% of the pool). DBRS Morningstar had previously projected a loss severity in excess of 25.0% for the loan; however, it repaid from the trust in October 2022 with a higher-than-expected recovery. The current rating confirmation reflects DBRS Morningstar’s loss expectations for the transaction, which is primarily driven by the pool’s largest loan, Romeoville Towne Center (Prospectus ID#16; 85.3% of the pool).

The loan is secured by a formerly grocery-anchored retail center in the Chicago suburb of Romeoville, Illinois. The loan initially transferred to the special servicer in March 2014 for imminent default, and the property has been real estate owned since February 2019. The property, which has never backfilled the vacant grocery space and is currently 26% occupied, was appraised at $9.3 million as of October 2021, an increase from the August 2020 value of $7.2 million but well below the issuance value of $27.2 million. Given the outstanding principal balance on Class C, a full repayment of the bond is reliant on a recovery of at least $40 per square foot for the asset, assuming the other two outstanding loans in the pool repay. The remaining two loans have extended maturity profiles as they are fully amortizing, and both are backed by retail properties in tertiary markets. DBRS Morningstar believes the transaction’s credit risks, which include a high pool loan-to-value ratio, below-average collateral quality of the underlying assets, uncertain timeline of recovery, and propensity for interest shortfalls, are accurately reflected in the current rating.

As of the January 2022 remittance, there has been a collateral reduction of 98.7% since issuance, with realized losses of approximately $101.6 million applied to date through Class D, which has been reduced by 48.5%.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no environmental/social/governance (ESG) factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929 (May 17, 2022).

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

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

The principal methodology is the North American CMBS Surveillance Methodology (October 3, 2022), 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

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. As the subject transaction only has one rated Class remaining, which is rated C (sf), no sensitivity analysis is included in the disclosure package.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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