Fitch Upgrades 4 Classes of MSC 2004-IQ8

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has upgraded four and affirmed six classes of Morgan Stanley Capital I Trust commercial mortgage pass-through certificates series 2004-IQ8. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrades are the result of increasing credit enhancement from continued paydown, stable performance of the underlying collateral and high percentage of loans structured with full amortization (81.83%). While the credit enhancement of classes F and G are high, Fitch capped the ratings based on exposure to single tenant properties (37%), which carry binary risk that may grow as pool concentration increases.

As of the March 2015 distribution date, the pool's aggregate principal balance has been reduced by 96% to $30.3 million, from $759.2 million at issuance. Interest shortfalls are currently affecting classes J through O.

Of the original 100 loans, 26 loans remain, and four (9.2%) are designated as Fitch Loans of Concern. No loans are in special servicing, and 15 loans (46.6%) are expected to mature in 2019. None of the remaining loans are defeased.

The largest Fitch Loan of Concern, Meridian Office Building (3.8% of the pool), is secured by a 30,582 sf office building located in Tempe, AZ. The property has suffered from poor performance over the last several years due to tenant rollover and high market vacancies. As of year-end 2014, the property was operating with negative cash flows but has remained current since issuance. Per the December 2015 rent roll, occupancy increased to 84% from 40% at year-end 2014.

The second largest Fitch Loan of Concern, Blake Center (2.4%), is secured by a 18,351 sf retail center built in 1966 and renovated in 2002. The property is located in Hopkins, MN. As of December 2014, occupancy declined to 76% from 100% at year-end 2013. Per the December 2015 rent roll, occupancy increased to 100%. However, two the second and third largest tenants consisting of 35% NRA have leases that expired. Per the master servicer, the borrower is currently negotiating renewal terms with both tenants. The loan has never been delinquent.

The third largest Fitch Loan of Concern, Florence Medical Building (1.8%), is secured by a 33,997 sf office building, built in 1967 and located in Downey, CA. Performance declined due to two tenants (19% NRA) vacating in 2014. Occupancy and DSCR declined to 58% from 76% and 0.99x from 1.20x, respectively. As of December 2015, occupancy is 58% and DSCR is 0.76x.

RATING SENSITIVITIES

The Rating Outlooks remain Stable as no rating changes are anticipated. Further upgrades will be limited due to the concentrated nature of the pool. Downgrades are possible if pool performance declines significantly.

DUE DILIGENCE USAGE

No third-party due diligence was provided or reviewed in relation to this rating action.

Fitch has upgraded the following ratings and revised Recovery Estimates (RE) as indicated:

--$8.5 million class E to 'AAAsf' from 'BBBsf'; Outlook Stable;

--$4.7 million class F to 'Asf' from 'BBsf'; Outlook Stable;

--$6.6 million class G to 'BBBsf' from 'Bsf'; Outlook Stable;

--$5.7 million class H to 'CCsf' from 'Csf'; RE 100%.

Fitch has affirmed the following classes and revised RE's as indicated:

--$2.9 million class D at 'AAAsf'; Outlook Stable;

--$1.8 million class J at 'Dsf'; RE 85%;

--$0 class K at 'Dsf'; RE 0%;

--$0 class L at 'Dsf'; RE 0%;

--$0 class M at 'Dsf'; RE 0%;

--$0 class N at 'Dsf'; RE 0%.

The class A-1, A-2, A-3, A-4, A-5 B and C 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 is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 28 May 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748781

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873395

Additional Disclosures

Dodd-Frank Rating Information Disclosure Formhttps://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1002441

Solicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1002441

Endorsement Policyhttps://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160413006542/en/

Fitch Ratings
Primary Analyst:
Catherine Barbieri, +1-212-908-0638
Associate Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson:
Mary MacNeill, +1-212-908-0785
Managing Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
New York
[email protected]

Source: Fitch Ratings

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