Morningstar DBRS Confirms Credit Ratings on All Classes of BSCMS 2007-PWR18

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on the Commercial Mortgage Pass-Through Certificates, Series 2007-PWR18 issued by Bear Stearns Commercial Mortgage Securities Trust 2007-PWR18 as follows:

-- Class B at C (sf)
-- Class C at C (sf)
-- Class D at C (sf)

All classes have credit ratings that do not typically carry trends in commercial mortgage-backed securities (CMBS) credit ratings.

The credit ratings continue to reflect Morningstar DBRS' loss projection upon the resolution of the sole remaining loan in the transaction, which is expected to erode the majority of the outstanding balance of Class B and the full outstanding balance of Class C, Class D, and the unrated Class E. Cumulative outstanding interest shortfalls totaling $28.4 million as of December 2024 reporting have also negatively affected the transaction. The interest shortfalls have risen to Class B, and in its analysis, Morningstar DBRS concluded that the outstanding shortfalls will also be realized as a loss to bondholders upon loan resolution.

The remaining loan, Marriott Houston Westchase (Prospectus ID#6), is secured by a 604-key, full-service hotel in Houston. The loan has been delinquent since September 2020 with servicer advances totaling $3.7 million as of December 2024 reporting. According to servicer commentary, there is no updated workout proposal between the lender and the borrower. An April 2024 site inspection found the property to be in good condition; however, deferred maintenance was noted following a fire at the property in February 2024, which affected 271 keys. Servicer commentary noted the repairs had been completed and the insurance claim process was ongoing. Property operating performance continues to struggle as the servicer reporting for the trailing 12 months ended May 31, 2024 indicates a 57.4% occupancy rate and $118.26 average daily rate.

The property was most recently appraised with a value of $37.5 million, dated January 2024, unchanged from the March 2023 appraised value. The value represents a decline of more than 70.0% from the issuance property value of $135.0 million. As of the December 2024 remittance, the loan had an outstanding principal balance of $69.9 million, with a total exposure of $75.0 million. Morningstar DBRS continues to project significant losses associated with the disposition of this asset, with an expected loss severity in excess of 85.0%.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS   
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings at https://dbrs.morningstar.com/research/437781 (August 13, 2024).

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

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

The principal methodology is North American CMBS Surveillance Methodology (December 13, 2024,
https://dbrs.morningstar.com/research/444617)

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

Morningstar DBRS notes that a traditional model-based sensitivity was not performed, however, Morningstar DBRS notes that the credit ratings are sensitive to the recoverability assumptions on the single remaining loan that are detailed in the accompanying press release. Should recoverability of the remaining loans be lower than that implied by the stressed values in the latest analysis, credit ratings lower in the capital stack would be those most negatively impacted.   

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

The credit rating methodologies used in the analysis of this transaction can be found at:
https://dbrs.morningstar.com/about/methodologies.

-- North American CMBS Multi-Borrower Rating Methodology (December 13, 2024; https://dbrs.morningstar.com/research/444616)

-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024; https://dbrs.morningstar.com/research/439702)

-- North American Commercial Mortgage Servicer Rankings (August 23, 2024; https://dbrs.morningstar.com/research/438283)

-- Legal Criteria for U.S. Structured Finance (December 3, 2024; https://dbrs.morningstar.com/research/444064)

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.