CHICAGO--(BUSINESS WIRE)--Fitch Ratings has downgraded 11 classes and affirmed 10 classes of Morgan Stanley Capital I Trust (MSC 2007-IQ16) commercial mortgage pass-through certificates series 2007-IQ16 due to due to increased loss expectations from loans in special servicing. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The downgrades are a result of higher expected losses primarily associated with loans in special servicing. The affirmations reflect sufficient credit enhancement of the remaining classes relative to Fitch's expected losses. Fitch modeled losses of 11.7% of the remaining pool; expected losses on the original pool balance total 13.5%, including $90.6 million (3.5% of the original pool balance) in realized losses to date. Fitch has designated 51 loans (19.0%) as Fitch Loans of Concern, which includes 21 specially serviced assets (14.2%).
As of the August 2013 distribution date, the pool's aggregate principal balance has been reduced by 15.8% to $2.19 billion from $2.6 billion at issuance. Per the servicer reporting, two loans (0.3% of the pool) are defeased. Interest shortfalls are currently affecting classes G through S.
The largest contributor to expected losses is a 754,882-sf regional mall (1.8% of the pool), located in Ashtabula, OH. The asset became REO in November 2012. The mall has only two remaining anchors from the original five at issuance. The remaining anchors are JC Penney and K-Mart. The mall was approximately 50% occupied as of August 2013. Fitch anticipates significant losses based on recent valuations.
The next largest contributor to expected losses is a 744-key, full-service hotel (4.1%) located in Daytona Beach, Florida. The asset became REO in August 2013. As of YE 2012, the hotel achieved TTM occupancy, ADR, and RevPAR of 66.0%, $129.57, and $85.49, respectively, surpassing its competitive set averages of 57.0%, $120.41, and $68.66. Results over the same period in 2011 for TTM occupancy, ADR, and RevPAR were 62.5%, $129.25, and $80.76, respectively. The servicer is formulating a strategy for disposition.
The third largest contributor to expected losses is a 379,685-sf Wal-Mart anchored retail property (3.5%) located in Milford, CT. As of June 2013, occupancy of the center was 96%. Occupancy for the center improved with HomeGoods taking possession of the vacant Circuit City space in April 2012. As of YE 2012, DSCR of the property was 1.08x. The loan is current as of August 2013.
Rating Outlooks on the investment grade rated classes remain Stable due to increasing credit enhancement and continued paydown of the classes. The 'AA' rated classes, while expected to remain stable may be subject to further downgrade based on the performance and recovery prospects of REO assets in special servicing. The distressed classes (those rated below 'B-sf') are subject to further downgrades as losses are realized.
Fitch downgrades the following classes and revises Rating Outlooks and Recovery Estimates (REs) as indicated:
--$194.7 million class A-M to 'AAsf' from 'AAAsf'; Outlook to Stable from Negative;
--$20 million class A-MFL to 'AAsf' from 'AAAsf'; Outlook to Stable from Negative;
--$44.9 million class A-MA to 'AAsf' from 'AAAsf'; Outlook to Stable from Negative;
--$131 million class A-J to 'CCCsf' from 'Bsf'; RE 95%;
--$30 million class A-JFL to 'CCCsf' from 'Bsf'; RE 95%;
--$33.7 million class A-JA to 'CCCsf' from 'Bsf'; RE 95%;
--$19.5 million class B to 'CCsf' from 'CCCsf'; RE 0%;
--$26 million class C to 'CCsf' from 'CCCsf'; RE 0%;
--$16.2 million class D to 'CCsf' from 'CCCsf'; RE 0%;
--$38.9 million class E to 'Csf' from 'CCsf'; RE 0%;
--$29.1 million class K to 'Dsf' from 'Csf'; RE 0%.
Fitch affirms the following classes as indicated:
--$204.4 million class A-1A at 'AAAsf'; Outlook Stable;
--$19.9 million class A-3 at 'AAAsf'; Outlook Stable;
--$1.3 billion class A-4 at 'AAAsf'; Outlook Stable;
--$13 million class F at 'Csf'; RE 0%;
--$35.7 million class G at 'Csf'; RE 0%;
--$26 million class H at 'Csf'; RE 0%;
--$26 million class J at 'Csf'; RE 0%;
--$0 class L at 'Dsf'; RE 0%;
--$0 class M at 'Dsf'; RE 0%;
--$0 class N at 'Dsf'; RE 0%.
Fitch does not rate the class O, P, Q and S certificates. Classes A-1 and A-2 have 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'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 18, 2012).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria