Approximately $828.0 Million of Structured Securities Affected
New York, February 03, 2011 -- Moody's Investors Service (Moody's) downgraded the ratings of five classes
and affirmed 13 classes of Morgan Stanley Capital I Trust, Commercial
Mortgage Pass-Through Certificates, Series 2003-IQ6
as follows:
Cl. A-3 Certificate, Affirmed at Aaa (sf); previously
on Jan 19, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-4 Certificate, Affirmed at Aaa (sf); previously
on Jan 19, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-1A Certificate, Affirmed at Aaa (sf); previously
on Jan 19, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. X-1 Certificate, Affirmed at Aaa (sf); previously
on Jan 19, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. X-2 Certificate, Affirmed at Aaa (sf); previously
on Jan 19, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. X-Y Certificate, Affirmed at Aaa (sf); previously
on Jan 19, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B Certificate, Affirmed at Aa1 (sf); previously
on Jan 19, 2011 Aa1 (sf) Placed Under Review for Possible Downgrade
Cl. C Certificate, Affirmed at A1 (sf); previously on
Jan 5, 2007 Upgraded to A1 (sf)
Cl. D Certificate, Affirmed at A3 (sf); previously on
Dec 19, 2003 Definitive Rating Assigned A3 (sf)
Cl. E Certificate, Affirmed at Baa1 (sf); previously
on Dec 19, 2003 Definitive Rating Assigned Baa1 (sf)
Cl. F Certificate, Affirmed at Baa2 (sf); previously
on Dec 19, 2003 Definitive Rating Assigned Baa2 (sf)
Cl. G Certificate, Affirmed at Baa3 (sf); previously
on Dec 19, 2003 Definitive Rating Assigned Baa3 (sf)
Cl. H Certificate, Affirmed at Ba1 (sf); previously
on Dec 19, 2003 Definitive Rating Assigned Ba1 (sf)
Cl. J Certificate, Downgraded to Ba3 (sf); previously
on Dec 19, 2003 Definitive Rating Assigned Ba2 (sf)
Cl. K Certificate, Downgraded to B2 (sf); previously
on Dec 19, 2003 Definitive Rating Assigned Ba3 (sf)
Cl. L Certificate, Downgraded to B3 (sf); previously
on Dec 19, 2003 Definitive Rating Assigned B1 (sf)
Cl. M Certificate, Downgraded to Caa2 (sf); previously
on Sep 18, 2008 Downgraded to B3 (sf)
Cl. N Certificate, Downgraded to Caa3 (sf); previously
on Sep 18, 2008 Downgraded to Caa1 (sf)
RATINGS RATIONALE
The downgrades are due to higher expected losses for the pool resulting
from anticipated losses from specially serviced and troubled loans.
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
the current ratings.
Moody's rating action reflects a cumulative base expected loss of 2.2%
of the current balance. At last review, Moody's cumulative
base expected loss was 1.9%. Moody's stressed scenario
loss is 5.4% 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 stressed macroeconomic
environment and continuing weakness in the commercial real estate and
lending markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in the industrial,
office, and retail sectors. Hotel performance has begun to
rebound, albeit off a very weak base. Multifamily has also
begun to rebound reflecting an improved supply / demand relationship.
The availability of debt capital is improving with terms returning towards
market norms. Job growth and housing price stability will be necessary
precursors to commercial real estate recovery. Overall, Moody's
central global scenario remains "hook-shaped" for 2011; we
expect overall a sluggish recovery in most of the world's largest economies,
returning to trend growth rate with elevated fiscal deficits and persistent
unemployment levels.
The principal methodology used in this rating was "CMBS: Moody's
Approach to Rating Fusion Transactions" published in April 2005.
In addition to methodologies and research available on moodys.com,
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.
Moody's review incorporated the use of the Excel-based CMBS Conduit
Model v 2.50 which is used for both conduit and fusion transactions.
Conduit model results at the Aa2 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 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 and B2, 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 underlying rating 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 underlying rating level, is
incorporated for loans with similar credit estimates in the same transaction.
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 September 18, 2008.
Please see the ratings tab on the issuer / entity page on moodys.com
for the last rating action and the ratings history.
Moody's Investors Service did not receive or take into account a third-party
due diligence report on the underlying assets or financial instruments
related to the monitoring of this transaction in the past six months.
DEAL PERFORMANCE
As of the January 18, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 16% to $837.6
million from $997.7 million at securitization. The
Certificates are collateralized by 166 mortgage loans ranging in size
from less than 1% to 13% of the pool, with the top
ten loans representing 46% of the pool. The pool includes
77 loans with investment grade credit estimates, representing 38%
of the pool. Loans secured by residential cooperative properties
account for 72 of those loans and 13% of the pool. Nine
loans, representing 6% of the pool, have defeased and
are collateralized with U.S. Government securities.
Twenty-one loans, representing 5% 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.
No loans have been liquidated from the trust since securitization.
Currently two loans, the Charleston Tower Office Building Loan ($11.5
million -- 1.4% of the pool) and Corn Exchange
National Bank Loan ($4.9 million -- 0.6%
of the pool) are in special servicing. The Charleston Tower Office
Building Loan transferred to special servicing in January 2010 and the
property became REO in August 2010. The Corn Exchange National
Bank Loan was transferred to special servicing in June 2010 due to payment
default. Moody's has estimated an aggregate $7.1
million loss (43% expected loss overall) for the specially serviced
loans.
Moody's has assumed a high default probability for two poorly performing
loans representing 1.1% of the pool. Moody's has
estimated a $2.2 million loss (25% expected loss
based on a 50% probability default) from the troubled loans.
Moody's was provided with full year 2009 operating results for 89%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV for the conduit component is 77% compared
to 80% at Moody's prior review. Moody's net cash flow reflects
a weighted average haircut of 12% to the most recently available
net operating income. Moody's value reflects a weighted average
capitalization rate of 8.8%.
Excluding specially serviced and troubled loans, Moody's actual
DSCR for the conduit component is 1.49X, compared to 1.52X
at last review. Moody's stressed DSCR for the conduit component
is 1.38. 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.
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 25
compared to 31 at Moody's prior review.
The largest loan with a credit estimate is the Mall at Tuttle Crossing
Loan ($112.5 million -- 13.4%
of the pool), which is secured by a 380,953 square foot (SF)
mall located in Columbus, Ohio. Anchor tenants include JC
Penny, Sears and Macy's. The loan is sponsored by Simon
Property Group. As of September 2010, the property was 90%
leased compared to 83% at last review. Due to an increase
in occupancy, performance has improved since last review.
Moody's credit estimate and stressed DSCR are A2 and 1.52X,
respectively, compared to A3 and 1.43X at last review.
The second loan with a credit estimate is the WestShore Plaza Loan ($30.0
million -- 3.6% of the pool), which represents
a 34% pari passu interest in a $88.1 million loan.
The loan is secured by a 1.1 million SF regional mall located in
Tampa, Florida. As of September 2010, the property
was 98% leased, which is the same as at last review.
The loan is sponsored by Glimcher Properties. Performance has been
stable. Moody's credit estimate and stressed DSCR are A2
and 1.60X, respectively, compared to A2 and 1.55X
at last review.
The third loan with a credit estimate is the 3 Times Square Loan ($25.9
million -- 3.1% of the pool), which represents
a 20.6% pari passu interest in $145.5 million
A-note. The loan is collateralized by a 883,405 SF
class A office property located in the Time Square District of New York
City. Major tenants include Reuters (79% of the net rentable
area (NRA); lease expiration November 2021) and Bank of Montreal
(12% of the NRA; lease expiration November 2021). The
property has been 100% leased since securitization. The
loan is sponsored by the Rudin Management Company and Reuters.
The loan was structured with a 218 month amortization schedule and has
amortized 11% since last review. Moody's credit estimate
and stressed DSCR are Aaa and 3.25X, respectively,
compared to Aaa and 2.74X at last review.
The fourth loan with a credit estimate is the 250 W 19th Street Loan ($18.7
million -- 2.2% of the pool), which is secured
by a 200 unit apartment building located in New York City's Chelsea
neighborhood. As of October 2010, the property was 95%
leased, a slight decline from 98% at last review.
Performance has been stable. Moody's credit estimate and
stressed DSCR are Aaa and 1.95X, respectively, compared
to Aaa and 1.91X at last review.
The fifth loan with a credit estimate is the Country Club Mall Loan ($17.7
million -- 2.1% of the pool), which is secured
by a 392,139 SF mall located in Cumberland, Maryland.
The mall is anchored by Sears (23% of the NRA; lease expiration
October 2012), Bon-Ton (19% of the NRA; lease
expiration January 2012) and JC Penny (18% of NRA; lease expiration
March 2011). The absence of competing retail centers in the region
offsets concerns about upcoming lease expirations. Moody's
credit estimate and stressed DSCR are Baa2 and 1.74X, respectively,
compared to Baa2 and 1.65X at last review.
The top three performing conduit loans represent 15.3% of
the pool. The largest loan is the 840 North Michigan Loan ($55.5
million -- 6.6% of the pool), which is secured
by an 87,136 SF retail center located on Chicago's Magnificent
Mile, a shopping and entertainment district. Major tenants
include H&M (53% of the NRA; lease expiration August 2013),
Escada (28% of the NRA; lease expiration January 2013) and
Casual Male (15% of the NRA; lease expiration January 2013).
Occupancy at the property has remained at 100% since securitization.
Performance has improved since last review due to amortization and rent
increases. Moody's LTV and stressed DSCR are 71% and
1.43X, respectively, compared to 79% and 1.13
at last review.
The second largest loan is the 88 Sidney Street Loan ($36.4
million -- 4.3% of the pool), which is collateralized
by a 145,275 SF class A medical office building located in Cambridge,
Massachusetts. The property is 100% leased to a single tenant,
Alkermes Inc., whose lease expires in June 2012. Moody's
utilized a Lit/Dark analysis to reflect potential cash flow volatility
due to the single tenant's near term lease expiration. The loan
was structured with a 300 month amortization schedule and has amortized
6% since last review. Moody's LTV and stressed DSCR
are 78% and 1.31X, respectively, compared to
81% and 1.27X at last review.
The third largest loan is the 609 Fifth Avenue Loan ($35.9
million -- 4.3% of the pool), which represents
a 37.3% pari passu interest in a $96.4 million
loan. The loan is secured by a 147,958 SF office and street
retail property located in the Rockefeller Center submarket of New York
City. Major tenants include American Girl Place (34% of
the NRA; lease expiration March 2018; retail tenant),
DZ Bank (29% of the NRA; lease expiration March 2017;
office tenant) and Reebok (10% of the NRA; lease expiration
November 2013; office tenant). Performance has been stable.
Moody's LTV and stressed DSCR are 91% and 1.07X,
respectively, compared to 94% and 1.04X at last review.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's Analytics
information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Andrew W. Florio
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Sandra Ruffin
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Downgrades Five and Affirms 13 Classes of MSC 2003-IQ6
