Fitch Ratings has downgraded 11 classes of Morgan Stanley Capital I Trust, series 2007-IQ15 (MSCI 2007-IQ15) commercial mortgage pass-through certificates, due to further deterioration of loan performance, a significant portion of which involves increased losses on the specially serviced loans. A detailed list of rating actions follows at the end of this release.
The downgrades reflect an increase in Fitch expected losses across the pool. Fitch modeled losses of 11.5% for the remaining pool (expected losses of the original pool are at 11.4%). Fitch has designated 43 loans (36.7%) as Fitch Loans of Concern, which includes 10 specially serviced loans (11.6%). At last review, there were only two loans in special servicing (4.6%). Fitch expects classes G through P may be fully depleted from losses associated with the specially serviced loans.
As of the December 2010 distribution date, the pool's aggregate principal balance has decreased by 1.3% to $2.03 billion from $2.05 billion at issuance. There are no realized losses. No loans are currently defeased. Cumulative interest shortfalls in the amount of $3.9 million are currently affecting classes F through P.
The largest contributor to Fitch modeled losses is a loan (12.3%) secured by a 790,000 square foot (sf) office property located in Stamford, CT. The loan is significantly overleveraged and does not pass Fitch's maturity stress.
The next largest contributor to Fitch modeled losses is a real estate owned (REO) five-property multifamily portfolio (3.2%) located in Jackson, TN. The portfolio became REO in September 2009. While some excess cash flow from the properties has been periodically applied to the debt, a large loss is anticipated for the loan based on a 2010 appraised value significantly below the outstanding loan balance.
The third largest contributor to Fitch modeled losses is a specially serviced loan (2.4%) secured by a 212,000 sf retail property located in San Diego, CA. The loan was transferred to special servicing in February 2010 for imminent payment default. The special servicer is pursuing a foreclosure action. A large loss is expected on this loan based on a June 2010 appraised value significantly below the outstanding loan balance.
Fitch downgrades the following classes, and assigns Outlooks and Recovery Ratings as indicated:
--$177.1 million class A-J to 'B/LS4' from 'Asf/LS3'; Outlook Negative;
--$33.4 million class B to 'B-sf/LS5' from 'BBB-sf/LS5'; Outlook Negative;
--$15.4 million class C to 'B-sf/LS5' from 'BBsf/LS5'; Outlook Negative;
--$28.2 million class D to 'CCCsf/RR1' from 'BBsf/LS5';
--$15.4 million class E to 'CCCsf/RR1' from 'Bsf/LS5';
--$30.8 million class F to 'CCsf/RR3' from 'Bsf/LS5';
--$23.1 million class G 'to 'Csf/RR6' from 'B-sf/LS5';
--$25.5 million class H to 'Csf/RR6' from 'B-sf/LS5';
--$10.3 million class J to 'Csf/RR6' from 'B-sf'/LS5;
--$5.1 million class K to 'Csf/RR6' from 'B-sf/LS5';
--$7.7 million class L to 'Csf/RR6' from 'B-sf/LS5'.
Fitch also affirms, revises LS ratings and assigns Outlooks to the following classes as indicated:
--$36.3 million class A-1 at 'AAAsf/LS2'; Outlook Stable;
--$227.4 million class A-2 at 'AAAsf/LS2'; Outlook Stable;
--$72.8 million class A-3 at 'AAAsf/LS2'; Outlook Stable;
--$796.9 million class A-4 at 'AAAsf/LS2'; Outlook Stable;
--$278 million class A-1A at 'AAAsf/LS2'; Outlook Stable;
--$205.4 million class A-M at 'AAAsf/LS4'; Outlook Stable.
Fitch withdraws the rating on the interest-only class X. (For additional information on the withdrawal, see 'Fitch Revises Practice for Rating IO & Pre-Payment Related Structured Finance Securities' dated June 23, 2010.)
Classes A-M through L are removed from Rating Watch Negative.
Additional information on Fitch's criteria for analyzing U.S. CMBS is available in the Nov. 17, 2010 report, 'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions', 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. 13, 2010);
--'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions' (Nov. 17, 2010).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547326
Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=574208
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