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Announcement:

Moody's Affirms 16 CMBS Classes of MSC 2003-IQ4

11 Aug 2011

Approximately $525.6 Million of Structured Securities Affected

New York, August 11, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of 16 classes of Morgan Stanley Capital I Inc., Commercial Mortgage Pass-Through Certificates, Series 2003-IQ4 as follows:

Cl. A-2, Affirmed at Aaa (sf); previously on Jun 17, 2003 Definitive Rating Assigned Aaa (sf)

Cl. B, Affirmed at Aaa (sf); previously on May 8, 2006 Upgraded to Aaa (sf)

Cl. C, Affirmed at A1 (sf); previously on Nov 13, 2007 Upgraded to A1 (sf)

Cl. D, Affirmed at A2 (sf); previously on Nov 13, 2007 Upgraded to A2 (sf)

Cl. E, Affirmed at Baa1 (sf); previously on Jun 17, 2003 Definitive Rating Assigned Baa1 (sf)

Cl. F, Affirmed at Baa2 (sf); previously on Jun 17, 2003 Definitive Rating Assigned Baa2 (sf)

Cl. G, Affirmed at Ba2 (sf); previously on Nov 18, 2010 Downgraded to Ba2 (sf)

Cl. H, Affirmed at B2 (sf); previously on Nov 18, 2010 Downgraded to B2 (sf)

Cl. J, Affirmed at Caa1 (sf); previously on Nov 18, 2010 Downgraded to Caa1 (sf)

Cl. K, Affirmed at Caa2 (sf); previously on Nov 18, 2010 Downgraded to Caa2 (sf)

Cl. L, Affirmed at Caa3 (sf); previously on Nov 18, 2010 Downgraded to Caa3 (sf)

Cl. M, Affirmed at C (sf); previously on Nov 18, 2010 Downgraded to C (sf)

Cl. N, Affirmed at C (sf); previously on Nov 18, 2010 Downgraded to C (sf)

Cl. X-1, Affirmed at Aaa (sf); previously on Jun 17, 2003 Definitive Rating Assigned Aaa (sf)

Cl. MM-A, Affirmed at Baa2 (sf); previously on Jul 9, 2009 Upgraded to Baa2 (sf)

Cl. MM-B, Affirmed at Baa3 (sf); previously on Jul 9, 2009 Upgraded to Baa3 (sf)

RATINGS RATIONALE

The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on our current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings.

Moody's rating action reflects a cumulative base expected loss of 3.1% of the current balance. At last review, Moody's cumulative base expected loss was 3.0%. Moody's stressed scenario loss is 6.1% of the current balance. Moody's provides a current list of base and stress scenario losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes.

Moody's analysis reflects a forward-looking view of the likely range of collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated during the current review. Even so, deviation from the expected range will not necessarily result in a rating action. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortization and loan payoffs or a decline in subordination due to realized losses.

Primary sources of assumption uncertainty are the current sluggish macroeconomic environment and varying performance in the commercial real estate property markets. However, Moody's expects to see increasing or stabilizing property values, higher transaction volumes, a slowing in the pace of loan delinquencies and greater liquidity for commercial real estate in 2011 The hotel and multifamily sectors are continuing to show signs of recovery, while recovery in the office and retail sectors will be tied to recovery of the broader economy. The availability of debt capital continues to improve with terms returning toward market norms. Moody's central global macroeconomic scenario reflects an overall sluggish recovery through 2012, amidst ongoing individual, corporate and governmental deleveraging, persistent unemployment, and government budget considerations.

The primary methodology used in this rating was: "CMBS: Moody's Approach to Rating Fusion Transactions" published in April 2005. Moody's also considered another methodology in this rating - "CMBS: Moody's Approach to Rating Large Loan/Single Borrower Transactions" published in July 2000. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.60 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in our analysis. Based on the model pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit estimate of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the credit estimate level, is incorporated for loans with similar credit estimates in the same transaction.

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 risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 19 compared to 22 at Moody's prior review.

In cases where the Herf falls below 20, Moody's also employs the large loan/single borrower methodology. This methodology uses the excel-based Large Loan Model v 8.1 and then reconciles and weights the results from the two models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type, and sponsorship. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations.

Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output.

The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. 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 full review is summarized in a press release dated November 18, 2010. Please see the ratings tab on the issuer / entity page on moodys.com for the last rating action and the ratings history.

DEAL PERFORMANCE

As of the July 15, 2011 distribution date, the transaction's aggregate certificate balance has decreased by 28% to $525.6 million from $727.7 million at securitization. The Certificates are collateralized by 99 mortgage loans ranging in size from less than 1% to 13% of the pool, with the top ten non-defeased loans representing 53% of the pool. Seven loans, representing 11% of the pool, have defeased and are secured by U.S. Government securities. The pool contains three loans with investment grade credit estimates, representing 29% of the pool.

Twenty-five loans, representing 15% 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) 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.

Three loans have been liquidated from the pool, resulting in a realized loss of $1.8 million (34% loss severity). Currently four loans, representing 4% of the pool, are in special servicing. Moody's estimates an aggregate $4.3 million loss for the specially serviced loans (31% expected loss on average).

Moody's has assumed a high default probability for three poorly performing loans representing 4.4% of the pool and has estimated an aggregate $4.5 million loss (20% expected loss based on a 50% probability default) from these troubled loans.

Moody's was provided with full year 2010 operating results for 83% of the pool. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 75% compared to 72% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 13.4% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.0%.

Excluding special serviced and troubled loans, Moody's actual and stressed DSCRs are 1.56X and 1.69X, respectively, compared to 1.62X and 1.75X 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 loan balance.

The largest loan with a credit estimate is the Mall at Millenia Loan ($66.8 million -- 12.7%), which represents a participation interest in the senior component of a $186.3 million mortgage loan. The loan is secured by the borrower's interest in a 1.1 million square foot high-in mall located in Orlando, Florida. The mall is anchored by Bloomingdale's, Macy's and Neiman Marcus. Property performance has improved since last review due to an increase in percentage rents. The property is 99% occupied, essentially the same as last review. The property is also encumbered by a $15.0 million non-pooled junior loan that serves as the security for non-pooled Classes MM-A and MM-B. Moody's current credit estimate and stressed DSCR for the senior loan are Baa1 and 1.52X, respectively, compared to Baa1 and 1.46X at last review. Moody's current credit estimate for the junior loan is Baa3, the same as at last review.

The second largest loan with a credit estimate is the Federal Center Plaza Loan ($64.4 million -- 12.3%), which represents a participation interest in a $128.8 million mortgage loan. The loan is secured by two adjacent Class B office buildings located in Washington D.C. The buildings total 722,000 square feet. General Services Agency (GSA) is the largest tenant, occupying approximately 87% of the space under two leases expiring in August 2019 (38% NRA) and January 2013 (49% NRA). The GSA has leased space at the property since 1981 and has previously renewed leases on a long-term basis in 1991, 1992, 2001 and 2009. Total property occupancy was 99% as of December 2010, the same as at last review. Moody's current credit estimate and stressed DSCR are Baa3 and 1.46X, respectively, compared to Baa3 and 1.36X at last review.

The third loan with a credit estimate is the Oakbrook Center Loan ($21.1 million -- 4%), which represents a participation interest in a $215.7 million mortgage loan. The loan is secured by a mixed-use property located west of Chicago in Oak Brook, Illinois that consists of an open-air regional mall, three office buildings and a ground lease to a hotel and a theater. The center totals approximately 2.4 million square feet, of which 1.6 million square feet serves as collateral for the loan. The mall is anchored by Macy's, Lord & Taylor, Neiman Marcus, Nordstrom and Sears. Total property occupancy was 98% as of December 2009, the same as at last review. Performance has been stable since last review. Moody's current credit estimate and stressed DSCR are Aa2 and 1.77X, respectively, compared to Aa2 and 1.84X at last review.

The top three performing conduit loans represent 15% of the pool balance. The largest loan is the Katy Mills Loan ($51.8 million -- 10% of the pool), which represents a participation interest in a $139.3 million mortgage loan. The loan is secured by the borrower's interest in a 1.2 million square foot outlet mall located near Houston in Katy, Texas. The mall is anchored by Bass Pro Shops, Burlington Coat Factory, Marshall's, and AMC Theaters. Total property occupancy was 84% as of December 2010, compared to 83% last review. Moody's LTV and stressed DSCR are 94% and 1.07X, respectively, compared to 100% and 1.00X at last review.

The second largest loan is the Encino Place Loan ($17.1 million -- 3.3%), which is secured by an 84,000 square foot mixed-use retail and office property located in Encino, California. Property performance has declined since securitization. Total property occupancy was 93% as of January 2011, compared with 88% as of December 2010. Moody's LTV and stressed DSCR are 128% and 0.8X, respectively, compared to 125% and 0.82X at last review.

The third largest loan is the Indian Creek Phase IV Loan ($14.8 million -- 2.7%), which is secured by a 248-unit multifamily property located in Cincinnati Ohio. The property was 96% occupied as of December 2010 compared to 94% at last review. Property performance has been stable over the life of the loan. Moody's LTV and stressed DSCR are 52% and 1.97X, respectively, compared to 54% and 1.92X at last review.

New York
Brad Kamedulski
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Sandra Ruffin
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service, Inc.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Affirms 16 CMBS Classes of MSC 2003-IQ4
No Related Data.
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