DBRS Morningstar Downgrades One Class, Confirms Remaining Classes of Bear Stearns Commercial Mortgage Securities Trust, Series 2007-TOP26

DBRS Limited (DBRS Morningstar) downgraded one class of Commercial Mortgage Pass-Through Certificates, Series 2007-TOP26 issued by Bear Stearns Commercial Mortgage Securities Trust, Series 2007-TOP26 as follows:

-- Class C to D (sf) from C (sf)

In addition, DBRS Morningstar confirmed its ratings on the remaining classes as follows:

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

DBRS Morningstar maintained the Interest in Arrears designation on Class B.

The downgrade on Class C was related to losses that affected the trust as reported in the December 2021 and January 2022 remittances, which resulted in a full loss to the remaining balance of the nonrated Class D and a minimal loss of $143,802 to Class C. The losses were due to the clawback of nonrecoverable advances related to the specially serviced loan, One AT&T Center (Prospectus ID#2, 98.4% of the pool), totalling approximately $9.7 million, as well as $4.1 million of principal losses that covered the interest payment. The largest defeased loan, One Dag Hammarskjold Plaza, repaid with the December 2021 remittance, resulting in the full repayment of Class AM and the partial repayment of Class A-J. As of the January 2022 remittance, four loans remain in the pool with a trust balance of $108.9 million, representing a collateral reduction of 94.8% since issuance.

The rating confirmations reflect DBRS Morningstar’s continued negative outlook for the largest loan remaining in the pool, One AT&T Center, which is secured by an office building in downtown St. Louis. The loan has been in default since May 2017, and the building remains vacant and is real estate owned, with the special servicer working to sell the property. The servicer noted that the property is under contract to sell with an expected disposition in Q2 2022. However, multiple property sales attempts have been unsuccessful in the past few years, and the subject’s value continues to plummet. According to the August 2021 appraisal, the property’s value is $9.2 million, compared with the January 2021 value of $14.1 million and the issuance value of $207.3 million. Given the drastic value decline from issuance, DBRS Morningstar expects the loan loss severity to exceed 100.0%.

ESG CONSIDERATIONS
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.

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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