Fitch Upgrades 2 Classes of MSC 2003-IQ5

CHICAGO--()--Fitch Ratings has upgraded two classes and affirmed nine classes of Morgan Stanley Capital I Trust (MSC) commercial mortgage pass-through certificates series 2003-IQ5. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

Class C and D have been upgraded due to increased credit enhancement as a result of continued paydown. Fitch modeled losses of 9.4% of the remaining pool; expected losses on the original pool balance total 0.9%, including $1.4 million (0.2% of the original pool balance) in realized losses to date. Twenty loans remain in the transaction. Fitch has designated nine loans (53.3%) as Fitch Loans of Concern, which includes four specially serviced assets (39.6%).

As of the February 2014 distribution date, the pool's aggregate principal balance has been reduced by 91.9% to $62.8 million from $778.8 million at issuance. No loans are defeased. Interest shortfalls are currently affecting class O.

The two largest contributors to expected losses are two crossed specially-serviced loans (12.3% of the pool), which is secured by a 59,998 square foot (sf) and a 59,663 sf office building located in Fairborn, OH, eight miles north of Dayton. The crossed loans transferred to special servicing in April 2013 due to maturity default. As of January 2014, occupancy at the two properties was 69% and 67%, respectively. The special servicer continues in its efforts to sell the notes.

The third largest contributor to expected losses is a loan secured by a 50,959 sf retail property in Arlington, TX (6% of the pool). The property is adjacent to a Super Target and across from The Parks at Arlington, a 1.5 million sf regional mall anchored by Macy's, Nordstrom, JC Penney and Dillard's. Occupancy was reported at 88% in September 2013, which is an increase from 77% reported YE 2012.

RATING SENSITIVITY

Rating Outlooks on classes E, F and G have been revised to Positive. Upgrades are possible in the future with continued pool paydown and overall stable loss expectations. Rating Outlooks on classes M and N are Negative due to the expected losses of the specially serviced loans. Should further deterioration of the specially serviced loans continue, further downgrades may be warranted.

Fitch upgrades the following classes as indicated:

--$8.7 million class C to 'AAAsf' from 'AA+sf', Outlook Stable;
--$7.8 million class D to 'AAsf' from 'AA-sf', Outlook Stable.

Fitch affirms the following classes but revises Rating Outlooks as indicated:

--$5.8 million class E at 'A+sf', Outlook to Positive from Stable;
--$6.8 million class F at 'A-sf', Outlook to Positive from Stable;
--$7.8 million class G at 'BBBsf', Outlook to Positive from Stable.

Fitch affirms the following classes as indicated:

--$5.8 million class H at 'BBB-sf', Outlook Stable;
--$2.9 million class J at 'BB+sf', Outlook Stable;
--$4.9 million class K at 'BBsf', Outlook Stable;
--$2.9 million class L at 'B+sf', Outlook Stable;
--$1.9 million class M at 'Bsf', Outlook Negative;
--$974,000 class N at 'B-sf', Outlook Negative.

Fitch does not rate the class O certificates. Classes A-1, A-2, A-3, A-4 and B have paid in full.

Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 11, 2013 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. 11, 2013).

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=724961
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=822681
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Contacts

Fitch Ratings
Primary Analyst
R. Brook Sutherland, +1-312-606-2346
Director
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Committee Chairperson
Britt Johnson, +1-312-606-2341
Senior Director
or
Media Relations
Sandro Scenga, New York, +1 212-908-0278
sandro.scenga@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
R. Brook Sutherland, +1-312-606-2346
Director
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Committee Chairperson
Britt Johnson, +1-312-606-2341
Senior Director
or
Media Relations
Sandro Scenga, New York, +1 212-908-0278
sandro.scenga@fitchratings.com