NEW YORK--(BUSINESS WIRE)--Fitch Ratings has upgraded three classes and affirmed 11 classes of Morgan Stanley Capital I Trust, series 2007-IQ15 (MSCI 2007-IQ15) commercial mortgage pass-through certificates. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations and upgrades to the senior classes reflect better than expected recoveries on specially serviced assets as well as overall improved performance of the underlying collateral in the pool.
Fitch modeled losses of 6.6% of the remaining pool; expected losses on the original pool balance total 12.6%, including $168.8 million (8.2% of the original pool balance) in realized losses to date. Fitch has designated 26 (34.7%) Fitch Loans of Concern, which include one specially serviced asset (0.2%).
As of the October 2015 distribution date, the pool's aggregate principal balance has been reduced by 34.5% to $1.34 billion from $2.05 billion at issuance. Per the servicer reporting, two loans (3.5% of the pool) are defeased. Interest shortfalls are currently affecting classes J through P.
The largest contributor to expected losses is the First Stamford loan (17.8% of the pool), which is secured by a 790,000 square foot (sf) suburban office property located in Stamford, CT. Property performance improved as of year-end (YE) 2014 with a servicer-reported DSCR of 1.08x compared with 0.93x for YE 2013. The YTD June 2015 servicer-reported DSCR was 1.15x. Property occupancy, which was reported at 94.6% as of July 2015, is out-performing the submarket. Per Reis, the third quarter 2015 reported vacancy rate for the Stamford CBD submarket was 27.6%. Additionally, over 40% of the NRA is leased to nationally recognized tenants with long-term leases expiring in 2019 and beyond. There is less than 1% tenant roll through 2016. The loan matures in July 2017.
The next largest contributor to expected losses is the Lynnwood Town Center loan (1.7%), which is secured by a 105,000 sf retail center located in Lynnwood, WA. Performance has improved with a servicer-reported June 30, 2015 annualized DSCR of 1.18x compared with 1.03x, as of YE 2014. As of the August 2015 rent roll, the property was 90% occupied with approximately 10% roll through 2016. Average rents are approximately 30% below market, per Reis (3Q 2015). The largest tenants, Michaels (23.7% of NRA) and Marshalls (23.7%), recently renewed for additional 5-year lease terms.
The third largest contributor to expected losses is The AES Building loan (2.4%), which is secured by a 430,000 sf office building located in Akron, OH. As of the June 2015 rent roll, the property had a reported occupancy of 89.3%. However, the largest tenant, American Elastomer Systems (AES; 33% of the NRA), which pays below market rent, has a lease expiration of Dec. 31, 2015. In July 2012, AES's parent company ExxonMobil announced plans to close the location beginning in 2014 through 2015 in a phased move out. The servicer has not reported any new leasing of the space, and the borrower continues to market the space. Fitch will continue to monitor the property for leasing updates.
The Stable Outlooks for the senior classes reflect their increased credit enhancement and expected continued pay down. Further upgrades to the distressed classes are possible should the underlying collateral continue to show positive performance improvements. Downgrades, although not expected, are possible should larger loans incur greater than modeled losses.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch has upgraded the following ratings:
--$205.4 million class A-M to 'Asf' from 'BBBsf'; Outlook revised to Stable from Negative;
--$177.1 million class A-J to 'CCCsf' from 'CCsf'; RE 70%;
--$33.4 million class B to 'CCsf' from 'Csf'; RE 0%.
Fitch has affirmed the following classes:
--$671.1 million class A-4 at 'AAAsf'; Outlook Stable;
--$226.2 million class A-1A at 'AAAsf'; Outlook Stable;
--$15.4 million class C at 'Csf'; RE 0%;
--$15.6 million class D at 'Dsf'; RE 0%;
--$0 class E at 'Dsf'; RE 0%;
--$0 class F at 'Dsf'; RE 0%;
--$0 class G at 'Dsf'; RE 0%;
--$0 class H at 'Dsf'; RE 0%;
--$0 class J at 'Dsf'; RE 0%;
--$0 class K at 'Dsf'; RE 0%;
--$0 class L at 'Dsf'; RE 0%.
Fitch does not rate the class M, N, O and P certificates. Fitch previously withdrew the rating on the interest-only class X certificates.
Additional information is available at www.fitchratings.com.
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria (pub. 10 Dec 2014)
Dodd-Frank Rating Information Disclosure Form