2009-10-02 23:02:03 -
Fitch Ratings has taken various rating actions on 21 classes of Morgan Stanley Capital I Trust 2007-TOP25, including downgrades to 14 classes.
In addition, Fitch has assigned Rating Outlooks, as applicable. A detailed list of rating actions follows at the end of this press release.
The downgrades are the result of loss expectations and reflect Fitch's prospective views regarding commercial
real estate market value and cash flow declines. Fitch forecasts potential losses of 5.7% for this transaction, should market conditions not recover. Today's rating actions are based on losses of 3.4%, including 100% of the losses associated with term defaults and any losses associated with maturities within the next five years. Given the significant term to maturity, Fitch's actions only account for 25% of the losses associated with maturities beyond five years. The bonds with Negative Outlooks indicate classes that may be downgraded in the future should full potential losses be realized. Fitch considers the Outlooks on the super-senior classes to be Stable due to projected losses having limited impact on credit enhancement when associated paydown is factored into the analysis.
Fitch analyzed the transaction and calculated expected losses by assuming cash flows on each of the properties decline 15% from year-end (YE) 2007 and property values decline 35% from issuance. These loss estimates were reviewed in more detail for loans representing 52.5% of the pool and, in certain cases, revised based on additional information and/or property characteristics.
Only 6.6% of the mortgages mature within the next five years.
Approximately 0.65% of the pool matures in 2011, and 6% in 2013. Between 2016 and 2017, 81.7% of the pool matures.
Fitch identified 38 Loans of Concern (19.3%) within the pool, five of which (5.1%) are specially serviced. Three of the Fitch Loans of Concern (10.8%) are within the transaction's top 15 loans (44%) by unpaid principal balance, one of which is 90 days delinquent.
Losses are expected on eight (27.5%) of the loans within the top 15: one (3.9%) of these loans is expected to default during the term, while losses on the remaining seven loans (23.6%) are expected at maturity.
Loss severities associated with these loans range from 2% to 55%.
The largest contributors to loss on a pool level basis (by outstanding balance) are as follows: Four Seasons Hotel (4.7%), Village Square (3.9%), and Shops at Kildeer (2.2%).
The Four Seasons Hotel consists of a 285-room hotel in the Beverly Hills region of Los Angeles, CA. Performance has declined, largely due to reduced travel demand in connection with the weak economy. The occupancy, average daily rate (ADR), and revenue per available room (RevPAR) as of June 2009 was 45.9%, $457.93, and $210.16, respectively, compared with 78.5%, $429.23, and $336.91, respectively, at issuance.
Fitch's analysis resulted in a higher probability of maturity default and a loss based on a 50% decline in value.
Village Square consists of a 237,834 sf mixed-use development in Las Vegas, NV. Approximately 167,000 sf of the center is collateral to the loan, consisting of retail and office uses. The loan transferred to special servicing in February 2009 after the sponsor, Triple Five Nevada Development Company, indicated they would be unable to pay future debt service obligations. The June 2009 rent roll indicates vacancy has increased substantially after expiring tenants did not renew their leases: occupancy of the office component declined to 63%, and the retail component occupancy has fallen to 51%. Recent property valuation indicates the debt amount exceeds recoverable value. The special servicer continues to follow a dual track workout which considers a possible modification or foreclosure.
The Shops at Kildeer consists of a 167,477 sf retail center in Kildeer, IL, approximately 34 miles northwest of the Chicago CBD. Major tenants at the center include Bed, Bath, and Beyond (21% of NRA), Old Navy (14%), and World Market (10%). These tenants have maturities in 2012, 2011, and 2012, respectively. Property occupancy declined from 100% to 79% after Circuit City vacated their space upon the company's bankruptcy and liquidation. The property will face a high level of rollover over the next five years, with 22% of the NRA expiring in 2011, 39% in 2012, 3% in 2013, and 13% in 2014. Fitch's analysis of the loan resulted in a higher probability of default at maturity due to challenges the sponsor will face with the upcoming rollover.
Fitch downgrades, removes from Rating Watch Negative, and assigns Outlooks and Loss Severity (LS) ratings to the following classes as indicated.
--$110.8 million class A-J to 'A/LS3' from 'AAA'; Outlook Negative;
--$27.2 million class B to 'BBB/LS4' from 'AA'; Outlook Negative;
--$11.7 million class C to 'BBB/LS5' from 'AA-'; Outlook Negative;
--$25.3 million class D to 'BB/LS5' from 'A'; Outlook Negative;
--$11.7 million class E to 'BB/LS5' from 'A-'; Outlook Negative;
--$13.6 million class F to 'B/LS5' from 'BBB+'; Outlook Negative;
--$13.6 million class G to 'B-/LS5' from 'BBB'; Outlook Negative;
--$11.7 million class H to 'B-/LS5' from 'BBB-'; Outlook Negative;
--$3.9 million class J to 'CCC/RR6' from 'BB+';
--$3.9 million class K to 'CC/RR6' from 'BB';
--$5.8 million class L to 'CC/RR6' from 'BB-';
--$3.9 million class M to 'CC/RR6' from 'B+';
--$1.9 million class N to 'CC/RR6' from 'B';
--$3.9 million class O to 'CC/RR6' from 'B-'.
Fitch also affirms the following classes and Outlooks as indicated.
--$44.7 million class A-1 at 'AAA/LS1'; Outlook Stable;
--$77.7 million class A-2 at 'AAA/LS1'; Outlook Stable;
--$62.3 million class A-AB at 'AAA/LS1'; Outlook Stable;
--$784.4 million class A-3 at 'AAA/LS1'; Outlook Stable;
--$142.3 million class A-1A at 'AAA/LS1'; Outlook Stable;
--$155.5 million class A-M at 'AAA/LS3'; Outlook Stable;
--Interest-only class X at 'AAA'; Outlook Stable;
Fitch does not rate class P.
Additional information on Fitch's amended criteria for analyzing recent vintage U.S. CMBS is available in the July 7, 2009 report, 'Surveillance Methodology for Recent Vintage U.S. CMBS', available on Fitch's web site at ' www.fitchratings.com :
' under the following headers.
Structured Finance then CMBS then Criteria Reports
Fitch will release a report titled 'Morgan Stanley Capital I Trust 2007-TOP25' that will contain a graph of revised loss expectations for the transaction at ' www.fitchratings.com :
' under the following headers.
Structured Finance then CMBS then Special Reports
Additional information is available at ' www.fitchratings.com :
'.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS :
.
IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE ' WWW.FITCHRATINGS.COM :
'.
PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.
Fitch RatingsChris Bushart, 212-908-0606, New YorkBritt
Johnson, 312-606-2341, ChicagoorMedia Relations:Sandro
Scenga, 212-908-0278, New YorkEmail:
sandro.scenga@fitchratings.com : mailto:sandro.scenga@fitchratings.com
