NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded four classes and affirmed 16 classes of Bear Stearns Commercial Mortgage Securities Trust (BSCMS) Series 2007-TOP26. A detailed list of rating actions follows at the end of this press release.
SENSITIVITY/RATING DRIVERS
The downgrades reflect an increase in Fitch expected losses across the pool and greater certainty of losses associated with specially serviced assets. Fitch modeled losses of 10.9% of the remaining pool; expected losses on the original pool balance total 11%, including losses already incurred. The pool has experienced $36.1 million (1.7% of the original pool balance) in realized losses to date.
Fitch has designated 50 loans (23.9%) as Fitch Loans of Concern, which includes 11 specially serviced assets (8.3%).
As of the January 2013 distribution date, the pool's aggregate principal balance has been reduced by 14.9% to $1.79 billion from $2.11 billion at issuance. Per the servicer reporting, one loan (0.05% of the pool) has defeased since issuance. Interest shortfalls are currently affecting classes G through P.
The largest contributor to expected losses is the specially-serviced 909 A Street loan (2.7% of the pool), which is secured by a 210,186 square (sf) office property located in Tacoma, WA. The loan was transferred to the special servicer in February 2012 due to the lease expiration in November 2013. The sole tenant vacated the property in 2010 when it moved its headquarters to Seattle. The tenant (guaranteed by Northwestern Mutual Life, rated 'AAA' with a Stable Outlook by Fitch) is required to make rental payments until the lease expires in November 2013. A cash flow sweep was triggered in December 2011, which is expected to collect approximately $4.4 million to cover costs associated with re-leasing the property.
The next largest contributor to expected losses is the Viad Corporate Center loan (3.1%), which is secured by a 476,424 sf office property located in Phoenix, AZ. The loan was modified in May 2011 and the terms included a principal write-down of $9 million to $56 million, and establishing an $8 million capital expense escrow for tenant improvements, leasing commissions and repairs. The year-end 2011 DSCR was 1.14x and as of the September 2012 rent roll the property is 62% occupied, an increase from 55.2% in September 2011. Leases representing only 3% of net rentable area (NRA) expire through year-end 2013.
The third largest contributor to expected losses is a specially-serviced loan (0.9%), secured by a 149,902 sf office building located in Ridgefield Park, NJ. The loan transferred to the special servicer in March 2012 due to monetary default resulting from a lease expiration that caused occupancy to drop from approximately 90% to 30%. The special servicer has engaged counsel and is proceeding with foreclosure.
Fitch downgrades the following classes as indicated and has assigned or revised Recovery Estimates (REs):
--$210.6 million class A-M to 'AAsf' from 'AAAsf', Outlook Negative;
--$160.6 million class A-J to 'CCCsf' from 'BBsf', RE 90%;
--$18.4 million class C to 'CCsf' from 'CCCsf', RE 0%;
--$18.4 million class F to 'Csf' from 'CCsf', RE 0%.
Fitch affirms the following classes as indicated:
--$12.4 million class A-2 at 'AAAsf', Outlook Stable;
--$65.4 million class A-3 at 'AAAsf', Outlook Stable;
--$68.2 million class A-AB at 'AAAsf', Outlook Stable;
--$991.9 million class A-4 at 'AAAsf', Outlook Stable;
--$121.7 million class A-1A at 'AAAsf', Outlook Stable;
--$42.1 million class B at 'CCCsf', RE 0%;
--$29 million class D at 'CCsf', RE 0%;
--$15.8 million class E at 'CCsf', RE 0%;
--$18.4 million class G at 'Csf', RE 0%;
--$18.4 million class H at 'Csf', RE 0%;
--$703,825 class J at 'Dsf', RE 0%;
--$0 class K at 'Dsf', RE 0%;
--$0 class L at 'Dsf', RE 0%;
--$0 class M at 'Dsf', RE 0%;
--$0 class N at 'Dsf', RE 0%;
--$0 class O at 'Dsf', RE 0%.
Fitch does not rate the class P certificates. Class A-1 has paid in full. Fitch previously withdrew the ratings on the interest-only class X-1 and X-2 certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 18, 2012 report, 'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria', which is available at 'www.fitchratings.com' under the following headers:
Structured Finance >> CMBS >> Criteria Reports
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (June 6, 2012);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 18, 2012).
Applicable Criteria and Related Research:
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696969
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679923
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