DBRS Morningstar Changes Trend on One Class, Confirms All Ratings on Morgan Stanley Capital I Trust, Series 2007-TOP25

DBRS Limited (DBRS Morningstar) confirmed the ratings on classes of Commercial Mortgage Pass-Through Certificates, Series 2007-TOP25 issued by Morgan Stanley Capital I Trust, Series 2007-TOP25 (the Trust) as follows:

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

The trend on Class A-J was changed to Negative from Stable. Classes B and C have ratings that do not carry a trend. Class C continues to carry an Interest in Arrears designation.

The rating confirmations reflect the transaction’s recent performance, which has been stable since February 2021, when DBRS Morningstar downgraded the rating on Class B. The trend change and the ratings on Classes B and C reflect DBRS Morningstar’s loss projections for the two loans in special servicing, which cumulatively represent 96.1% of the pool. Both loans are secured by retail assets and are real estate owned (REO) following foreclosure actions executed by the servicer. Both are expected to be resolved with significant losses to the Trust.

As of the January 2022 remittance, there has been collateral reduction of 94.1% since issuance, with realized losses of approximately $99.3 million applied to date through Class D. Principal repayment has paid down the senior bonds and into Class A-J, now the most senior bond remaining in the Trust. Four of the original 204 loans remain in the transaction. In addition to the two loans in special servicing, there are two loans, representing 3.9% of the pool, on the servicer’s watchlist.

The largest loan in special servicing, Shoppes at Park Place (Prospectus ID#3, 77.2% of the pool), is secured by an anchored retail centre in Pinellas Park, Florida. The loan initially transferred to the special servicer in January 2017 because of maturity default, and the asset has been REO since March 2020. The property was appraised at $80.5 million as of March 2020, down marginally from the January 2019 appraised value of $81.5 million. However, DBRS Morningstar notes that this valuation does not take into account the impact from the ongoing Coronavirus Disease (COVID-19) pandemic, which has had a significant effect on the performance of the already strained brick-and-mortar retail sector.

The other loan in special servicing, Romeoville Town Center (Prospectus ID#16, 18.9% of the pool), is secured by a former grocer-anchored retail centre 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 REO since February 2019. The property was appraised at $7.2 million as of August 2020, down from the October 2018 appraised value of $9.1 million.

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/373262.

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

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

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 CMBS 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 North American CMBS Surveillance Methodology (March 26, 2021), 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 info@dbrsmorningstar.com.

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 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 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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

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

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