Fitch Downgrades 5 Classes of MSCI 2007-TOP27

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has downgraded five and affirmed 14 classes of Morgan Stanley Capital I Trust, commercial mortgage pass-through certificates, series 2007-TOP27 (MSCI 2007-TOP27). A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The downgrades are due to an increase in expected losses for the pool, partially as a result of the transfer of the underperforming Town Square Mall to special servicing. Fitch modeled losses of 5.6% of the remaining pool; expected losses on the original pool balance total 8.9%, including $135 million (4.9% of the original pool balance) in realized losses to date. Fitch has designated 47 loans (21.2%) as Fitch Loans of Concern, which includes two specially serviced assets (1.5%).

As of the July 2015 distribution date there are 180 loans remaining of the 234 loans and the pool's aggregate principal balance has been reduced by 28.6% to $1.98 billion from $2.77 billion at issuance. Per the servicer reporting, one loan (0.2% of the pool) is defeased. Interest shortfalls are currently affecting classes G through P.

The largest contributor to expected losses is the specially-serviced Towne Square Mall loan (1.3% of the pool), which is secured by a 357,355 square foot (sf) retail center located in Owensboro, KY. The loan transferred to special servicing in February 2015 due to imminent payment default. In December 2014 Sears vacated the 122,136 sf store at the subject property even though their lease extends until September 2016. In January 2015 another Tenant, Body Central, closed a 4,000 sf store in the Towne Square Mall leaving the mall 35% vacant. Additionally, with Sears vacating it gives 16 other tenants the option to exercise their co-tenancy clause. The debt service coverage ratio (DSCR) as of March 2015 was 1.0x.

The next largest contributor to expected losses is the Parkshore Plaza 1 loan (2.1%), which is secured by a four-building 269,254 sf office complex located in Folsom, CA. The largest tenant, Verizon Wireless, occupies three of the buildings which total 191,512 sf (71% of net rentable area). The Verizon Wireless lease was set to expire in June 2015; Fitch will continue to monitor this loan for updates. Occupancy as of March 2015 was 82% and the first-quarter DSCR was 1.52x.

The transaction also includes a non-pooled trust component secured by the leased fee of 330 West 34th Street, a 46,412 sf parcel of land ground leased on a triple-net basis to Vornado Realty Trust until December 2021. Vornado has been the only tenant at the property since 1986 and is currently in its first extension option, with four options totaling 128 years remaining. The parcel is improved with an 18-story, 636,915 sf office building with retail at street level.

RATING SENSITIVITIES

The Rating Outlooks on classes A-1A through A-MFL remain Stable due to increasing credit enhancement and continued pay down. The Rating Outlook on class A-J remains Negative due to the declining value of the Towne Square Mall. Distressed classes (those rated below 'B') may be subject to downgrades as losses are realized or if realized losses are greater than Fitch's expectations.

DUE DILIGENCE USAGE

No third-party due diligence was provided or reviewed in relation to this rating action.

Fitch downgrades the following classes and assigns Recovery Estimates (REs) as indicated:

--$190.6 million class A-J to 'BBsf' from 'BBB-sf'; Outlook Negative;

--$54.5 million class B to 'CCCsf' from 'Bsf'; RE 100%;

--$30.6 million class C to 'CCsf' from 'CCCsf'; RE 0%;

--$30.6 million class D to 'Csf' from 'CCCsf'; RE 0%;

--$21.6 million class E to 'Dsf' from 'CCsf'; RE 0%.

Fitch affirms the following classes as indicated:

--$254.3 million class A-1A at 'AAAsf'; Outlook Stable;

--$1.1 billion class A-4 at 'AAAsf'; Outlook Stable;

--$172.3 million class A-M at 'AAAsf'; Outlook Stable;

--$100 million class A-MFL at 'AAAsf'; Outlook Stable;

--$0 class F at 'Dsf'; RE 0%;

--$0 class G at 'Dsf'; RE 0%;

--$0 class H at 'Dsf'; RE 0%;

--$0 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%;

--$50.2 million class AW34 at 'AAAsf', Outlook Stable.

The class A-1, A-2, A-3 and A-AB certificates have paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the rating on the interest-only class X certificates.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria (pub. 10 Dec 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=988498

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=988498

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://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 MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150724005665/en/

Fitch Ratings
Primary Analyst
Darren Liss
Director
+1-212-908-0753
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Britt Johnson
Senior Director
+1-312-606-2341
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
[email protected]

Source: Fitch Ratings

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