Fitch Upgrades 4 Classes of MSC 2004-IQ8

NEW YORK--()--Fitch Ratings has upgraded four and affirmed seven classes of Morgan Stanley Capital I Trust commercial mortgage pass-through certificates series 2004-IQ8. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrades are based on the stable performance of the remaining collateral and high percentage of loans structured with full amortization (93.82%). The affirmations are due to sufficient credit enhancement to offset increasing concentration risk; upgrades were limited due to the lack of tranche thickness of the subordinate classes.

As of the May 2015 distribution date, the pool's aggregate principal balance has been reduced by 95.31% to $35.6 million, from $759.2 million at issuance. Interest shortfalls are currently affecting classes J through O. There are 29 loans remaining, nine (20.23%) of which are designated as Fitch Loans of Concern. One loan (2%) is in special servicing, and 16 loans (46.65%) are expected to mature in 2019.

The largest loan in the pool, Seneca Meadows Corporate Center II (16.1%), is secured by a 94,304 square foot (sf) office building in Germantown, MD. The property is 100% occupied by Randall's Store, a Texas grocery chain, which has a lease expiration of November 2022

Meridian Office Building (1.3% of the pool), the largest contributor to expected losses, is secured by a 30,582 sf office building located in Tempe, AZ. The property has suffered from poor performance over the last several years due to tenant rollover and high market vacancies. As of year-end 2013, the property was operating with negative cash flow but has remained current since issuance. The most recent servicer-reported occupancy was 49% as of year-end 2013.

The next largest contributor to expected losses is Mossman Center (1.3%), which is secured by a 52,879 sf mixed-use property located in Albuquerque, NM. The servicer-reported occupancy and debt service coverage ratio (DSCR) was 94% and 0.77x, respectively, as of September 2014. The average rental rate has dropped from $10.65 psf at Dec. 31, 2013 to $9.21 psf at Sept. 30, 2014. The loan has remained current since issuance.

RATING SENSITIVITIES

Rating Outlooks on classes C through E remain Stable due to increasing credit enhancement and continued paydown. Although credit enhancement has increased for classes F and G, volatility remains as there are several loans occupied by one or few tenants which present binary risk.

Fitch upgrades the following classes:

--$7.6 million class D to 'AAAsf' from 'BBBsf', Outlook Stable;

--$8.5 million class E to 'BBBsf' from 'BBsf', Outlook Stable;

--$4.7 million class F to 'BBsf' from 'CCCsf', Outlook Stable Assigned;

--$6.6 million class G to 'Bsf' from 'CCsf', Outlook Stable Assigned;

Fitch affirms the following classes and assigns REs as indicated:

--$603 thousand class C at 'AAAsf', Outlook Stable;

--$5.7 million class H at 'Csf', RE 95%;

--$1.8 million 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%.

The class A-1, A-2, A-3, A-4, A-5 and B certificates have paid in full. Fitch does not rate the class O certificates. 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. 10, 2014 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' (March 2015);

--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (December 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864268

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria

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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=984663

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.

Contacts

Fitch Ratings
Primary Analyst
Amy Gan
Director
+1-212-908-9143
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Mary MacNeill
Managing Director
+1-212-908-0785
or
Media Relations
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Amy Gan
Director
+1-212-908-9143
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Mary MacNeill
Managing Director
+1-212-908-0785
or
Media Relations
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com