Market Overview

Fitch Downgrades 11 Classes of MSC 2007-IQ16

CHICAGO--(BUSINESS WIRE)--

Fitch Ratings has downgraded 11 classes and affirmed 11 classes of Morgan Stanley Capital I (MSCI) Trust commercial mortgage pass-through certificates, series 2007-IQ16, due to increased loss expectations from loans in special servicing and further deterioration of collateral performance. A detailed list of rating actions follows at the end of this press release.

Fitch modeled losses of 10.5% of the remaining pool; expected losses on the original pool balance total 9.6%. Fitch has designated 60 loans (21.9%) as Fitch Loans of Concern, which includes 23 specially serviced assets (14.5%).

As of the October 2012 distribution date, the pool's aggregate principal balance has been reduced by 12.1% to $2.28 billion from $2.6 billion at issuance. Per the servicer reporting, one loan (0.2% of the pool) has defeased since issuance. Interest shortfalls are currently affecting classes J through S.

The largest contributor to expected losses is the specially-serviced Hilton Daytona Beach loan (4.2% of the pool), which is secured by a 744-key, full-service hotel located in Daytona Beach, Florida. The loan transferred to special servicing in October 2011 due to imminent default. As of September 2012, the hotel achieved year-to-date occupancy, ADR, and RevPAR of 71.9%, $138.94, and $99.94, respectively, surpassing its competitive set averages of 64.8%, $119.33, and $77.31. Results over the same period in 2011 for year-to-date occupancy, ADR, and RevPAR were 71.2%, $135.43, and $96.40, respectively. The borrower and special servicer are in discussion on a strategy for resolution, with modification terms being evaluated.

The next largest contributor to expected losses is the specially-serviced Ashtabula Mall loan (1.7%), which is secured by a 754,882 sf regional mall located in Ashtabula, OH. Performance of the mall continues to deteriorate with the departure of Sears in June 2012. The mall has only two remaining anchors from the original five at issuance. The remaining anchors are JC Penney and K-Mart. The mall was 49.7% occupied as of August 2012. The loan is in foreclosure proceedings, and a receiver was appointed in October 2011. Fitch anticipates significant losses based on recent valuations.

The third largest contributor to expected losses is the Milford Crossing loan (3.3%), which is secured by a 379,685 sf retail property located in Milford, CT. As of June 2012, occupancy of the center improved to 96% from 89% at YE 2011 due to the signing of a new lease in the vacant Circuit City space. As of June 2012, DSCR of the property was 0.82x but is anticipated to improve with the commencement of the new lease. The loan is current as of October 2012.

The second largest loan (5.5% of collateral balance) in the pool, 60 Wall Street, was affected by Hurricane Sandy and was without power for a period of time. As of Nov. 2, 2012, the servicer has advised that no adverse material damages to the building have occurred. Based on a cursory inspection by a Fitch analyst on Nov. 14, 2012, it appeared to be open, but several buildings in the vicinity were damaged; a large boiler was on the street in front of the subject property..

Fitch downgrades the following classes and assigns Recovery Estimates (REs) as indicated:

--$131 million class A-J to 'Bsf' from 'BBBsf', Outlook Negative;

--$30 million class A-JFL to 'Bsf' from 'BBBsf', Outlook Negative;

--$33.7 million class A-JA to 'Bsf' from 'BBBsf', Outlook Negative;

--$19.5 million class B to 'CCCsf' from 'BBsf', RE 60%;

--$26 million class C to 'CCCsf' from 'BBsf', RE 0%;

--$16.2 million class D to 'CCCsf' from 'Bsf', RE 0%;

--$38.9 million class E to 'CCsf' from 'CCCsf', RE 0%;

--$13 million class F to 'Csf' from 'CCCsf', RE 0%;

--$35.7 million class G to 'Csf' from 'CCCsf', RE 0%;

--$26 million class H to 'Csf' from 'CCsf', RE 0%;

--$6.7 million class L to 'Dsf' from 'Csf', RE 0%.

Fitch affirms the following classes and revises the Rating Outlooks as indicated:

--$210.2 million class A-1A at 'AAAsf', Outlook Stable;

--$17.3 million class A-2 at 'AAAsf', Outlook Stable;

--$83 million class A-3 at 'AAAsf', Outlook Stable;

--$1.3 billion class A-4 at 'AAAsf', Outlook Stable;

--$194.7 million class A-M at 'AAAsf', Outlook to Negative from Stable;

--$20 million class A-MFL at 'AAAsf', Outlook to Negative from Stable;

--$44.9 million class A-MA at 'AAAsf', Outlook to Negative from Stable;

--$26 million class J at 'Csf', RE 0%;

--$32.4 million class K at 'Csf', RE 0%;

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

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

Class A-1 has paid in full. Fitch does not rate the class O, P, Q and S 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. 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 >> 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);

--'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions' (Dec. 21, 2011).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679923

Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=662869

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 Ratings
Primary Analyst
David Ro, +1-312-368-3132
Associate Director
Fitch, Inc.
70 West Madison
Chicago, IL 60602
or
Committee Chairperson
Mary MacNeill, +1-212-908-0785
Managing Director
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
sandro.scenga@fitchratings.com

 

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