Feb 15 - Fitch Ratings has affirmed 13 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
Fitch modeled losses of 5% of the remaining pool; expected losses on the
original pool balance total 1.7%, including losses already incurred. The pool
has experienced $2.2 million (0.3% of the original pool balance) in realized
losses to date. Fitch has designated 19 loans (31.2%) as Fitch Loans of Concern,
which includes three specially serviced assets (9.7%) and the three largest
loans in the pool (43.4%).
As of the January 2013 distribution date, the pool's aggregate principal balance
has been reduced by 71.6% to $206.5 million from $727.8 million at issuance. Per
the servicer reporting, four loans (9% of the pool) have defeased. Interest
shortfalls are currently affecting classes K through O.
Following the January distribution date the largest specially-serviced loan,
which was secured by a 260,000 square foot (sf) mixed-use complex in Cranford,
NJ (4.8% of the pool) was sold. A loss of approximately $3.5 million is expected
to be reflected in the next distribution report.
The largest contributor to modeled losses is secured by a 122-unit multifamily
apartment building in Tampa, FL (1.8%). The servicer reported year-end (YE) 2011
debt service coverage ratio (DSCR) was 0.72 times (x) with 96% occupancy rate,
compared to a DSCR of 1.44x with 98.4% occupancy rate at issuance. Low DSCR was
the result of reduced revenue due to lower occupancy and significant increase in
operating expenses. The borrower was renovating units before they were turned
over to new tenants. The loan remains current and with the master servicer.
The next largest contributor to expected losses is the specially-serviced loan
secured by a 101,286-sf office building in Wauwatosa, WI. The loan transferred
to the special servicer on Aug. 21, 2009 due to servicer determination of
imminent default. As of July 31, 2012, the building is 69.3% occupied. A
property inspection on Aug. 6, 2012 revealed property to be in good condition.
However, weak financials continue to result from occupancy issues. The borrower
is currently seeking a modification of the loan terms, with negotiations
The largest loan in the pool, the Federal Center Plaza (30.4%), is secured by
two eight-story office buildings totaling 722,000-sf located on Fourth Street
between C and D streets in the Washington, D.C. CBD. The General Service
Administration (GSA) lease (50% of total space) was set to expire on Jan. 2,
2013. The borrower is in process of extending with GSA. According to the
borrower, the process has been slow due to Congressional pressure.
The loan remains current and with the master servicer as of the January 2013
Remittance Report. Fitch expects no loss on the loan as the loan per square foot
is low at $174 per foot. However, the refinance of the loan at its maturity of
March 2013 may be delayed due to the ongoing lease negotiations.
The second largest loan, Encino Place (9%), is secured by the fee-simple
interest in an 84,395-sf property located in Encino, CA. The first two stories
(57,206 sf) of the three-story property consist of retail space, and the third
story (27,189 sf) consists of office space. Recent poor performance (DSCR is
1.05x as of Sept. 30, 2012) is the result of reduced revenue due to lower
occupancy, combined with increased operating expenses, when compared to
underwriting. Occupancy has steadily declined since 2008 and rebound to 81% as
of Sept. 30, 2012.
The third largest loan, 1801 North Military Trail, is secured by a 60,135-sf
suburban office building in Boca Raton, FL. Poor performance (DSCR is 0.93x as
of Sept. 30, 2012) is the result of reduced revenue due to decreased rents
combined with increased R&M expenses. Revenue reduced when tenant Hodgson Russ
vacated upon the lease expiration date of March 31, 2011. Competition could
prove problematic as well, due to the availability of vacancies at other
Fitch affirms the following classes as indicated:
--$109.5 million class A-2 at 'AAAsf', Outlook Stable;
--$18.2 million class B at 'AAAsf', Outlook Stable;
--$23.7 million class C at 'AAsf', Outlook Stable;
--$4.5 million class D at 'Asf', Outlook Stable;
--$7.3 million class E at 'A-sf', Outlook Stable;
--$7.3 million class F at 'BBBsf', Outlook Stable;
--$8.2 million class G at 'BBsf', Outlook Stable;
--$8.2 million class H at 'B-sf', Outlook Stable;
--$3.6 million class J at 'CCCsf', RE 100%;
--$1.8 million class K at 'CCCsf', RE 100%;
--$5.5 million class L at 'CCsf', RE 100%;
--$1.8 million class M at 'CCsf', RE 90%.
--$1.8 million class N at 'Csf', RE 0%.
The class A-1 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 Fitch's Dec. 18, 2012 report, 'U.S. Fixed-Rate Multiborrower
CMBS Surveillance and Re-REMIC Criteria', available at 'www.fitchratings.com'
under the following headers:
Structured Finance >> CMBS >> Criteria Reports
Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (June 6, 2012);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec.
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria