Approximately $462 Million of Structured Securities Affected
New York, June 09, 2010 -- Moody's Investors Service (Moody's) affirmed the ratings of 13 classes,
upgraded one class and downgraded one class of Morgan Stanley Capital
I, Inc. Commercial Mortgage Pass-Through Certificates,
Series 2003-IQ5. The upgrade is due to increased credit
support from paydowns, amortization and defeasance. The downgrade
is due to higher expected losses for the pool caused by increased credit
quality dispersion and anticipated losses from several poorly performing
watchlisted loans. The affirmations are due to key rating parameters,
including Moody's loan to value (LTV) ratio, Moody's stressed DSCR
and the Herfindahl Index (Herf), remaining within acceptable ranges.
The rating action is the result of Moody's on-going surveillance
of commercial mortgage backed securities (CMBS) transactions.
As of the May 17th, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 41% to $462
million from $778 million at securitization. The Certificates
are collateralized by 62 mortgage loans ranging in size from less than
0.5% to 12% of the pool, with the top ten loans
representing 54% of the pool. Five loans, representing
11% of the pool, have defeased and are secured by United
States Government securities. Two loans, representing 20%
of the pool have investment grade underlying ratings.
Eighteen loans, representing 12% of the pool, are on
the master servicer's watchlist. The watchlist includes loans which
meet certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC; formerly Commercial Mortgage Securities Association)
monthly reporting package. As part of our ongoing monitoring of
a transaction, Moody's reviews the watchlist to assess which loans
have material issues that could impact performance.
The pool has not realized any losses since securitization and currently
there are no loans in special servicing.
Moody's has assumed a high default probability on two cross collateralized
loans, representing 2% of the pool, which mature within
the next 36 months and have a Moody's stressed DSCR less than 1.0X.
Moody's has estimated an aggregate loss of $1.8 million
(20% expected loss on average based on a weighted average 50%
probability of default) from these troubled loans.
Moody's was provided with full year 2008 and full year or partial year
2009 operating statements for 83% and 69%, respectively,
of the pool. Moody's weighted average LTV for the conduit pool
is 75% compared to 78% at last review.
Moody's conduit actual and stressed DSCRs are 1.53 X and 1.51X,
respectively, compared to 1.57X and 1.43X at last
review. Moody's actual DSCR is based on Moody's net cash flow (NCF)
and the loan's actual debt service. Moody's stressed DSCR is based
on Moody's NCF and a 9.25% stressed rate applied to the
Moody's uses a variation of Herf to measure diversity of loan size,
where a higher number represents greater diversity. Loan concentration
has an important bearing on potential rating volatility, including
the risk of multiple-notch downgrades under adverse circumstances.
The credit neutral Herf score is 40. The pool has a Herf score
of 21 compared to 30 at last review.
The largest loan with an underlying rating, which is also the largest
loan in the pool, is the Two Commerce Square Loan ($53.9
million - 11.7% of the pool), which represents
a 50% pari-passu interest in a $107.9 million
loan. The property is also encumbered by a subordinate B-note
of $77 million held outside the trust. The loan is secured
by a 40-story, 953,000 square foot Class A office building
located in downtown Philadelphia, Pennsylvania. As of January
2010, the property was 85% leased, compared to 99%
at last review. The largest tenants are Price Waterhouse Coopers
LLP (23% of the gross leasable area (GLA); lease expiration
April 2015) and Reliance Standard Life insurance (13% of the GLA;
lease expiration December 2015). The decline in performance as
a result of increased vacancy has been offset by amortization.
The loan has amortized 5% since last review. The loan matures
on May 15, 2013. Moody's current underlying rating and stressed
DSCR are Baa3 and 1.28X, respectively, compared to
Baa3 and 1.21X at Moody's last review.
The second largest loan with an underlying rating is the Three Times Square
Loan ($26.9 million - 5.8% of the pool),
which represents a 21% pari passu interest in a $129 million
loan. The property is also encumbered by a subordinate B note of
$94.8 million held outside the trust. The loan is
secured by an 884,000 square foot Class A office building located
in midtown Manhattan. As of December 2009, the property was
99% leased, the same as at last review. The largest
tenants are Reuters Group (72% of the GLA; lease expiration
September 2021) and Bank of Montreal (12% of the GLA; lease
expiration November 2021). The loan is fully amortizing and has
amortized 15% since last review. The loan matures on November
15, 2021. Moody's current underlying rating and stressed
DSCR are Aaa and 3.08X, respectively, compared to Aaa
and 2.96X at Moody's last review.
The top three conduit loans represent 20% of the pool. The
largest conduit loan is the Plaza America Office Towers III & IV Loan
($38.6 million -- 8.3% of the pool),
which represents a 50% pari passu interest in a $77 million
loan. The loan is secured by two Class A office buildings located
in Reston, Virginia and totaling 473,000 square feet.
The largest tenants are Unisys Corporation (59% of the GLA;
lease expiration August 2018) and NCI Information Systems (16%
of the GLA; lease expiration June 2013). The property was
93% leased as of March 2010 compared to 100% at last review.
The loan matures on August 15, 2013. Moody's LTV and stressed
DSCR are 81% and 1.27X, respectively, compared
to 88% and 1.17X at last review.
The second largest conduit loan is the Quail Springs Marketplace Loan
($26.1 million -- 5.7% of the pool),
which is secured by a 295,700 square foot power center located in
Oklahoma City, Oklahoma. The largest tenants are Office Depot
(11% of the GLA; lease expiration August 2013), Ross
Dress For Less (10% of the GLA; lease expiration January 2014)
and Old Navy (10% of the GLA; lease expiration April 2012).
The property was 98% leased as of May 2009, compared to 100%
at last review. The loan matures on May 15, 2013.
Moody's LTV and stressed DSCR are 74% and 1.37X, respectively,
compared to 77% and 1.32X at last review.
The third largest conduit loan is the GGP Portfolio Loan ($25.9
million -- 5.6% of the pool), which is secured
by two anchored retail centers located in Utah. The first property,
University Crossing (206,000 square feet), is located 40 miles
south of Salt Lake City and is anchored by Burlington Coat Factory,
OfficeMax, and Barnes & Noble. The second property,
Gateway Crossing (180,000 square feet), is located approximately
12 miles south of Salt Lake City and is anchored by Ross Stores,
T.J.Maxx and Michaels Stores. The properties were
99% leased as of March 2009 compared to 97% at last review.
Both properties were included in GGP's bankruptcy filing and have
been returned to the master servicer. The loan maturity was extended
from July 2010 to January 2014. Performance has been stable.
Moody's LTV and stressed DSCR are 77% and 1.33X, respectively,
compared to 84% and 1.18X at last review.
Moody's rating action is as follows:
-Class A-4, $354,075,216,
affirmed at Aaa; previously assigned Aaa on 10/15/2003
-Class X-1, Notional, affirmed at Aaa;
previously assigned Aaa on 10/15/2003
-Class X-2, Notional, affirmed at Aaa;
previously assigned Aaa on 10/15/2003
-Class B, $22,389,000, affirmed
at Aaa; previously upgraded to Aaa from Aa1 on 3/19/2007
-Class C, $30,178,000, upgraded
to Aa3 from A1; previously upgraded to A1 from A2 on 3/19/2007
-Class D, $7,788,000, affirmed at
A2; previously upgraded to A2 from A3 on 3/19/2007
-Class E, $5,840,000, affirmed at
Baa1; previously assigned Baa1 on 10/15/2003
-Class F, $6,814,000, affirmed at
Baa2; previously assigned Baa2 on 10/15/2003
-Class G, $7,788,000, affirmed at
Baa3; previously assigned Baa3 on 10/15/2003
-Class H, $5,841,000, affirmed at
Ba1; previously assigned Ba1 on 10/15/2003
-Class J, $2,921,000, affirmed at
Ba2; previously assigned Ba2 on 10/15/2003
-Class K, $4,867,000, affirmed at
Ba3; previously assigned Ba3 on 10/15/2003
-Class L, $2,920,000, affirmed at
B1; previously assigned B1 on 10/15/2003
-Class M, $1,947,000, affirmed at
B2; previously assigned B2 on 10/15/2003
-Class N, $974,000, downgraded to Caa1
from B3; previously assigned B3 on 10/15/2003
Moody's monitors transactions on a monthly basis through two sets of quantitative
tools -- MOST® (Moody's Surveillance Trends) and CMM
(Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior review is summarized
in a press release dated September 4, 2008.
The principal methodology used in rating and monitoring this transaction
is "CMBS: Moody's Approach to Rating Fusion Transactions" published
on April 19, 2005. The methodology is available on www.moodys.com
in the Rating Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found in the
Rating Methodologies sub-directory on Moody's website. In
addition, Moody's publishes a weekly summary of structured finance
credit, ratings and methodologies, available to all registered
users of our website, at www.moodys.com/SFQuickCheck
Michael M. Gerdes
Senior Vice President
Structured Finance Group
Moody's Investors Service
Structured Finance Group
Moody's Investors Service
Moody's Affirms 13, Upgrades One and Downgrades One CMBS Class of MSC 2003-IQ5