Fitch Ratings has upgraded five and affirmed three 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 release.
KEY RATING DRIVERS
The upgrades are the result of increasing credit enhancement from continued paydown, stable performance of the underlying collateral and seasoned loans with low leverage.
Fitch modeled losses of 14.1% of the remaining pool; expected losses on the original pool balance total 1.6%, including $7 million (1% of the original pool balance) in realized losses to date. Fitch has designated nine loans (55.5%) as Fitch Loans of Concern, which includes two specially serviced assets (30%).
As of the December 2014 distribution date, the pool's aggregate principal balance has been reduced by 95.6% to $31.8 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 North Mayfair loan (16.8% of the pool), which is secured by a 101,286 sf office building located in Wauwatosa, WI. The loan transferred to special servicing upon maturity default in December 2012. The special servicer granted nine-month forbearance to the borrower with the expectations the loan would pay off in full. As part of the forbearance agreement, the borrower executed a deed-in-lieu agreement which transferred title to the trust on Dec. 31, 2014.
The next largest contributor to expected losses is the specially-serviced Spinnaker Plaza loan (13.2%), which is secured by a mixed-use property with 22,000 sf ground floor office and retail space 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 and became REO as of May 2014. The special servicer is working on stabilizing the property before listing it for sale. In addition, the special servicer reports the property overall is 90% occupied; the residential component is 100% and the commercial space is approximately 78% occupied.
RATING SENSITIVITY
Rating Outlooks on classes F through K are 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 Rating Outlooks as indicated:
--$628,070 class F to 'AAAsf' from 'Asf'; Outlook Stable;
--$8.2 million class G to 'AAsf' from 'BBBsf'; Outlook Stable;
--$8.2 million class H to 'BBBsf' from 'BBsf'; Outlook Stable.
--$3.6 million class J to 'BBsf' from 'Bsf'; Outlook Stable;
--$1.8 million class K to 'Bsf' from 'CCCsf'; Outlook Stable.
Fitch affirms the following classes and assigns REs as indicated:
--$5.5 million class L at 'CCsf'; RE 45%;
--$1.8 million class M at 'CCsf'; RE 0%;
--$1.8 million class N at 'Csf'; RE 0%.
Fitch does not rate 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 then CMBS then Criteria Reports
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 4, 2014);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 10, 2014).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389
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=966375
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