Fitch Upgrades 5 Classes of MSCI 2003-IQ4
NEW YORK--(BUSINESS WIRE)--Fitch Ratings has upgraded five classes and affirmed four classes of Morgan Stanley Capital I Trust's (MSCI) commercial mortgage pass-through certificates series 2003-IQ4. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The upgrades are the result of increasing credit enhancement from continued paydown and seasoned loans with low leverage.
Fitch modeled losses of 12% of the remaining pool; expected losses on the original pool balance total 1.7%, including $7.1 million (1% of the original pool balance) in realized losses to date. Fitch has designated 10 loans (42.5%) as Fitch Loans of Concern, which includes three specially serviced assets (28.6%).
As of the January 2014 distribution date, the pool's aggregate principal balance has been reduced by 93.9% to $44 million from $727.8 million at issuance. No loans are defeased. Interest shortfalls are currently affecting classes N through O.
The largest contributor to expected losses is the specially-serviced Spinnaker Plaza loan (9.8% of the pool, second largest remaining loan), which is secured by a mixed-use property with 22,000 square foot (sf) ground floor office and retail and 32 apartment units above on a ground lease located in Milford, CT. The loan transferred to special servicing in November 2012 due to monetary default. The special servicer appointed a receiver in March 2013 and has been pursuing foreclosure, which is expected to occur in the near future. The special servicer also reports the occupancy was 88% as of year-end 2013.
The next largest contributor to expected losses is the specially-serviced North Mayfair loan (12.7% and largest loan in the pool), which is secured by a 101,286 sf office building located in Wauwatosa, WI. The loan transferred to special servicing in August 2009 due to imminent default. The property has struggled with occupancy issues since it transferred and the borrower has been trying to lease it up. The special servicer reports that a nine-month forbearance has been granted to the borrower with the expectation the sale proceeds will pay off the loan in full.
The third largest contributor to expected losses is the specially-serviced Executive Tower loan (6.1%), which is secured by a 51,854 sf office building located in Omaha, NE. The loan transferred to special servicing upon maturity default in December 2012. The borrower has been remitting excess cash flow from the property, which has been insufficient to cover debt service payments. In addition, the borrower is working on leasing the property and is expected to sign a new lease for approximately 19.3% of the net rentable are. The special servicer reports the occupancy was 18% as of January 2014.
Rating Outlooks on classes E through H remain Stable due to increasing credit enhancement and continued paydown. Fitch ran additional stresses when considering upgrades. Although credit enhancement remains high relative to the rating category, further upgrades were limited due to increasing pool concentration and smaller than average subordinate class sizes. Any increase in expected losses may have a greater impact on credit enhancement.
Fitch upgrades the following classes and assigns Recovery Estimates (REs) as indicated:
--$5.6 million class E to 'AAAsf' from 'A-sf', Outlook Stable;
--$7.3 million class F to 'Asf' from 'BBBsf', Outlook Stable;
--$8.2 million class G to 'BBBsf' from 'BBsf', Outlook Stable;
--$8.2 million class H to 'BBsf' from 'B-sf', Outlook Stable;
--$3.6 million class J to 'Bsf' from 'CCCsf', Outlook Stable.
Fitch affirms the following classes and assigns (REs) as indicated:
--$1.8 million class K at 'CCCsf', RE 100%;
--$5.5 million class L at 'CCsf', RE 70%;
--$1.8 million class M at 'CCsf', RE 0%;
--$1.8 million class N at 'Csf', RE 0%.
The class A-1, A-2, B, C and D 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. 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
Global Structured Finance Rating Criteria