CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has downgraded six classes and affirmed seven classes of Morgan Stanley Capital (MSCI) Trust, series 2007-IQ13, commercial mortgage pass-through certificates. The downgrades are a result of an increase in expected losses on specially serviced loans, as well as a higher loss expectation on the now largest specially serviced loan. A detailed list of rating actions follows at the end of this release.
Fitch modeled losses of 10.4% of the remaining pool; expected losses on the original pool balance total 11.8%. The pool has experienced $56 million (3.5% of the original pool balance) in realized losses to date. Fitch has designated 38 loans (34.3%) as Fitch Loans of Concern, which includes 11 specially serviced assets (12%).
As of the September 2012 distribution date, the pool's aggregate principal balance has been reduced by 19.8% to $1.31 billion from $1.64 billion at issuance. Per the servicer reporting, two loans (3.6% of the pool) have defeased since issuance. Interest shortfalls are currently affecting classes E through P.
The largest contributor to expected losses is the 75-101 Federal Street loan (16% of the pool), which is secured by two interconnected, class A office buildings comprising 811,687 square feet (sf) in Boston's financial district. As of June 2012, occupancy for the building was 81% in-line with occupancy at year-end 2011 (YE 2011), and slightly improved from occupancy of 79% at YE 2010. Net operating income (NOI) has increased 13% from YE 2010 to YE 2011; however, NOI is still down 12% since issuance and cashflow is only slightly higher than debt service with DSCR of 1.02x at June 2012 and 1.05x at YE 2011. The loan is current as of September 2012.
The next largest contributor to expected losses is a specially-serviced 1.2 million-sf, regional mall(6.8%) in Hazelwood, MO, a suburb of St. Louis. The mall offers a mix of value-oriented and entertainment tenants. The loan transferred to special servicing in October 2011 due to the borrower's inability to secure financing by the loan's maturity date. A deed-in-lieu of foreclosure was signed in August 2012. Approximately 33% of the NRA is scheduled to expire by the end of 2013.
The third largest contributor to expected losses is a specially-serviced a suburban office property (1.10) in Annapolis, MD totaling 72,052 sf. The loan transferred to special servicing in January 2010 due to imminent default and became real-estate owned in October 2011. The servicer renewed the largest tenant occupying 39% of the NRA until 2016. The property is 91% occupied as of June 2012.
Fitch downgrades the following classes and assigns or revises Recovery Estimates (REs) as indicated:
--$149.6 million class A-J to 'CCCsf' from 'Bsf', RE 85%;
--$16.4 million class C to 'CCsf' from 'CCCsf', RE 0%;
--$16.4 million class D to 'CCsf' from 'CCCsf', RE 0%;
--$14.3 million class E to 'Csf' from 'CCCsf', RE 0%;
--$18.4 million class F to 'Csf' from 'CCCsf', RE 0%;
--$14.3 million class G to 'Csf' from 'CCsf', RE 0%.
Fitch affirms the following classes as indicated:
--$283.2 million class A-1A at 'AAAsf'; Stable Outlook;
--$83.4 million class A-2 at 'AAAsf'; Stable Outlook;
--$64 million class A-3 at 'AAAsf'; Stable Outlook;
--$448.8 million class A-4 at 'AAAsf; Stable Outlook;
--$163.9 million class A-M at 'AAsf'; Stable Outlook
--$32.8 million class B at 'CCCsf', RE 0%;
--$8.7 million class H at 'Dsf', RE 0%.
Fitch does not rate the class O and P certificates and maintains the 'Dsf, RE 0%' rating on classes J, K, L, M and N. Fitch previously withdrew the ratings on the interest-only class X and X-Y certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 21, 2011 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'. 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);
--'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions' (Dec. 21, 2011).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions
David Ro, +1 312-368-3132
70 West Madison Street
Chicago, IL 60602
Mary MacNeill, +1 212-908-0785
Sandro Scenga, +1 212-908-0278
Source: Fitch Ratings