NEW YORK--(BUSINESS WIRE)--Fitch Ratings has upgraded seven and affirmed seven classes of Morgan Stanley Capital I Trust (MSCI) series 2005-TOP19. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The upgrades are the result of increased credit enhancement (CE) due to loan payoffs, continued amortization and overall stable performance since the prior review.
Fitch modeled losses of 15.1% of the remaining pool; expected losses on the original pool balance total 2.2%, including $9.5 million (0.8% of the original pool balance) in realized losses to date. Fitch has designated five loans (22.3%) as Fitch Loans of Concern, which includes four specially serviced assets (13.5%). Interest shortfalls are currently affecting classes M through P.
As of the February 2016 distribution date, the pool's aggregate principal balance has been reduced by 90.4% to $117.5 million from $1.23 billion at issuance. Of the original 157 loans, 19 remain. Per the servicer reporting, two loans (15.7% of the pool) are defeased. The non-specially serviced loans mature in 2020 (73.4%) and 2025 (13.1%).
The largest contributor to modeled losses is a loan (8.9%) secured by an 85,111 square foot (sf) grocery anchored retail center located in Santee, CA (San Diego). Tenants at the center include Haggen, Inc. (51% of net rentable area (NRA), expiring July 2016), CKO Kickboxing (5%, expiring June 2024), and Round Table Pizza (3.5%, expiring July 2018). Media sources have indicated that Haggen, Inc. plans to close all of its California stores. The servicer-reported net operating income (NOI) debt service coverage ratio (DSCR) increased to 1.29x as of year-end (YE) 2015 from 1.09x as of YE 2014. Fitch has added this loan as a Loan of Concern and will continue to monitor it for deteriorating performance. In its analysis, Fitch stressed the reported NOI assuming additional vacancy due to the expected exit of Haggen, Inc.
The next largest contributor to modeled losses is a specially serviced loan (4%) secured by a 52,599 sf single-tenant retail property located in Crystal Lake, IL. The property is 100% occupied by Sports Authority through a triple-net (NNN) lease extending through January 2017. The store has closed and the space is now dark. The loan transferred after the borrower indicated to the special servicer that they would be unable to repay the loan at the scheduled maturity in May 2015. The servicer recently approved the borrower's requested 18 month maturity date extension. Fitch will continue to monitor the loan for performance and leasing updates. Fitch's losses were based on a stressed appraisal value assuming the property is vacant.
The third largest contributor to modeled losses is a real estate owned (REO) office building (4.1%) located in West Palm Beach, FL, measuring 53,652 sf. The loan transferred to the special servicer in March 2015 due to payment default and has been REO since November 2015. The property has experienced declining revenue over the past few years as a result of increased vacancy. Per the servicer provided rent roll dated June 2015, occupancy stood at 48%.
The Rating Outlooks on classes AJ through G remain Stable as credit enhancement is high and downgrades are not expected. Further upgrades were not warranted due to pool concentration and the high percentage of specially serviced assets and Fitch Loans of Concern, as well as the increasing pool concentration and the long dated maturities of the remaining non-specially serviced loans. Classes E and F have been assigned Positive outlooks due to high credit enhancement levels. Upgrades are possible with stable pool performance, increased credit enhancement and/or resolution of the specially serviced loans. Downgrades to the distressed classes H through N are possible should additional losses be realized.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch upgrades the following classes and revises or assigns Outlooks as indicated:
--$5.7 million class A-J to 'AAAsf' from 'AAsf'; Outlook Stable;
--$23 million class B to 'AAAsf' from 'Asf'; Outlook Stable;
--$12.3 million class C to 'Asf' from 'BBBsf'; Outlook Stable;
--$15.4 million class D to 'BBBsf' from 'BBsf'; Outlook Stable;
--$12.3 million class E to 'BBsf' from 'Bsf'; Outlook to Positive from Stable;
--$9.2 million class G to 'Bsf' from 'CCCsf'; Outlook Stable assigned;
--$3.1 million class J to 'CCCsf' from 'CCsf'; RE 100%.
Fitch affirms the following classes and revises Outlooks as indicated:
--$9.2 million class F at 'Bsf'; Outlook to Positive from Stable;
--$10.7 million class H at 'CCCsf'; RE 100%;
--$3.1 million class K at 'CCsf'; RE 65%;
--$6.1 million class L at 'CCsf'; RE 0%;
--$1.5 million class M at 'Csf'; RE 0%;
--$3.1 million class N at 'Csf'; RE 0%;
--$2.8 million class O at 'Dsf'; RE 0%.
The class A-1, A-2, A-3, A-AB, A-4A and A-4B certificates have paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the ratings on the interest-only class X-1 and X-2 certificates.
Additional information is available at www.fitchratings.com.
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Re-REMIC Criteria (pub. 13 Nov 2015)
Dodd-Frank Rating Information Disclosure Form