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Rating Action:

Moody's Downgrades Two Classes of Morgan Stanley Capital I Trust 2003-IQ6

18 Sep 2008
Moody's Downgrades Two Classes of Morgan Stanley Capital I Trust 2003-IQ6

Approximately $913.0 Million of Structured Securities Affected

New York, September 18, 2008 -- Moody's Investors Service downgraded the ratings of two classes and affirmed 17 classes of Morgan Stanley Capital I Trust 2003-IQ6, Commercial Mortgage Pass-Through Certificates, Series 2003-IQ6 as follows:

-Class A-2, $36,684,697, affirmed at Aaa

-Class A-3, $83,000,000, affirmed at Aaa

-Class A-4, $470,824,000, affirmed at Aaa

-Class A-1A, $207,783,866, affirmed at Aaa

-Class X-1, Notional, affirmed at Aaa

-Class X-2, Notional, affirmed at Aaa

-Class X-Y, Notional, affirmed at Aaa

-Class B, $26,191,000, affirmed at Aa1

-Class C, $29,932,000, affirmed at A1

-Class D, $11,224,000, affirmed at A3

-Class E, $7,483,000, affirmed at Baa1

-Class F, $11,225,000, affirmed at Baa2

-Class G, $7,483,000, affirmed at Baa3

-Class H, $6,236,000, affirmed at Ba1

-Class J, $4,989,000, affirmed at Ba2

-Class K, $2,494,000, affirmed at Ba3

-Class L, $2,494,000, affirmed at B1

-Class M, $2,494,000, downgraded to B3 from B2

-Class N, $2,495,000, downgraded to Caa1 from B3

Moody's downgraded Classes M and N due to increased dispersion.

As of the September 15, 2008 distribution date, the transaction's aggregate certificate balance has decreased by approximately 7.5% to $923.0 million from $997.7 million at securitization. The Certificates are collateralized by 173 mortgage loans ranging in size from less than 1.0% to 12.7% of the pool, with the top 10 loans representing 44.2% of the pool. The pool includes five loans with investment grade underlying ratings, representing 23.4% of the pool, and 74 residential co-op loans which have underlying ratings of Aaa, representing 12.9% of the pool. Eleven loans, representing 7.3% of the pool, have defeased and are collateralized with U.S. Government securities.

The pool has not experienced any losses since securitization and currently there are no loans in special servicing. Twenty loans, representing 8.3% 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 Commercial Mortgage Securities Association's 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.

Moody's was provided with partial and year-end 2007 operating results for 87.0% of the pool. Moody's loan to value ("LTV") ratio is 79.6% compared to 81.8% at Moody's prior review in January 2007 and 85.4% at securitization. Although overall pool performance has improved since securitization, the pool has experienced increased LTV ratio dispersion. Based on Moody's analysis, 7.2% of the conduit pool has an LTV in excess of 120.0% compared to 2.1% at last review and 0.0% at securitization. Moody's is particularly concerned about the performance of the conduit's fifth largest loan, the Woodhawk Apartments Loan ($22.7 million, 2.5% of the pool balance), which is secured by a 436 unit apartment complex located in suburban Pittsburg, Pennsylvania. The property's performance has declined significantly since securitization due to decreased rental revenues and increased operating expenses. The property was 86.9% occupied as of December 2007 compared to 93.8% at securitization. Revenues have declined as a result of increased vacancy as well as rental concessions. Moody's LTV is 129.7%.

The largest loan with an underlying rating is the Mall at Tuttle Crossing Loan ($116.9 million -- 12.7%), which is secured by the borrower's interest in a 1.1 million square foot regional mall located in Dublin, Ohio, approximately 15 miles north of Columbus. The mall is anchored by Macy's, J.C. Penney and Sears. All of the anchors own their respective buildings and lease the underlying land. The in-line shops were 83.0% leased as of December 2007 compared to 94.7% at last review and 88.7% at securitization. The decline in occupancy is due to lease expirations which occurred in 2007. The loan sponsor is Simon Property Group. Moody's current underlying rating is A3, the same as at last review.

The second largest loan with an underlying rating is the Westshore Plaza Loan ($31.4 million - 3.4%), which represents a 34.0% participation interest in a $90.6 million first mortgage loan. The loan is secured by the borrower's interest in a 1.1 million square foot regional mall located in Tampa, Florida. The mall is anchored by Macy's, J.C. Penney, Sears and Saks Fifth Avenue. All of the anchors own their respective buildings and lease the underlying land. The in-line shops were 97.4% occupied as of January 2008 compared to 96.9% at last review. Cash flow has increased due to rent and occupancy increases and loan amortization. The loan sponsor is Glimcher Realty Trust. Moody's current underlying rating is A2 compared to A3 at last review.

The third largest loan with an underlying rating is the Three Times Square Loan ($29.0 million -- 3.2%), which represents a 20.6% pari passu interest in a $142.3 million first mortgage loan. The loan is secured by an 883,400 square foot Class A office building located in the Times Square submarket of New York City. The building's anchor tenant is Reuters Group Limited (Moody's senior unsecured rating Baa1 -- stable outlook), which occupies 79.4% of the premises through November 2021. The building was 98.9% occupied as of January 2008, essentially the same as at last review. The loan amortizes on a 218 month schedule and has amortized 15.0% since securitization. Moody's current underlying rating is Aaa, the same as at last review.

The remaining two loans with underlying ratings comprise 4.1% of the pool. The 250 West 19th Street Loan ($19.6 million -- 2.1%) is secured by a 200-unit apartment building located in the Chelsea submarket of New York City. Performance has improved due to increased revenues and stable expenses. Moody's current underlying rating is Aaa compared to Aa1 at last review. The Country Club Mall Loan ($18.6 million -- 2.0%) is secured by a 392,000 square foot retail center located in Cumberland, Maryland. Moody's current underlying rating is Baa2, the same as at last review.

The top three conduit loans represent 14.5% of the pool. The largest conduit loan is the 840 North Michigan Avenue Loan ($57.8 million -- 6.3%), which is secured by an 87,000 square foot retail property located on the "Magnificent Mile" in Chicago, Illinois. The property is 100.0% leased, the same as at last review. The largest tenants are H&M (52.6% GLA; lease expiration August 2013), Escada (27.8% GLA; lease expiration January 2013) and Casual Male (15.4%; lease expiration January 2013). Moody's LTV is 79.2% compared to 80.2% at last review.

The second largest conduit loan is the 88 Sidney Street Loan ($38.7 million -- 4.2%), which is secured by a 145,200 square foot Class A biotechnology building located in Cambridge, Massachusetts. Built in 2002, the property is 100.0% occupied by Alkermes through June, 2012. Alkermes is a biotechnology company specializing in the development of products based on sophisticated drug delivery technologies. The loan amortizes on a 300 month schedule and has amortized by 8.7% since securitization. Moody's LTV is 81.1%, essentially the same as at last review.

The third largest conduit loan is 609 Fifth Avenue Loan ($37.1 million -- 4.0%) which represents a 37.3% participation interest in a $100.0 million first mortgage loan. The loan is secured by a 148,000 square foot mixed use property located in the Rockefeller Center submarket of New York City. Approximately 69.0% of the building is leased to office users and the remaining 31.0% is retail space. The building was 97.7% leased as of December 2007 compared to 98.3% at last review. The major office tenants are DZ Bank (26.9% NRA; lease expiration March 2017) and Reebok International LTD (9.7% NRA; lease expiration November 2013). The retail space is 100.0% leased to American Girl Place Inc. (lease expiration March 2018). Moody's LTV is 94.0% compared to 96.4% at last review.

Moody's periodically completes full reviews in addition to monitoring transactions on a monthly basis. Moody's prior full review is summarized in a press release dated January 5, 2007.

Moody's has published rating methodologies outlining our analytical approach to surveillance and our approach to rating conduit and fusion transactions. In addition, Moody's has published numerous articles outlining our ratings approach to the various property types customarily deposited within these transactions along with other articles on credit issues unique to CMBS. The major rating methodologies employed in analyzing this transaction include:

• CMBS: Moody's Approach to Surveillance, September 30, 2002 -- this paper provides an overview of Moody's surveillance philosophy, an indication of what prompts a conduit review, how conduit and large loan monitoring is performed, and what our objectives are with respect to post-closing requests and servicer reviews;

• CMBS: Moody's Approach to Rating U.S. Conduit Transactions, September 15, 2000 -- this paper provides an overview of rating methodology and process with details on property level analysis, loan level analysis, legal and structural characteristics, and portfolio characteristics with supplementary information on legal issues, a research summary, helpful information for commercial real estate transactions, capitalization rates, and guidelines for capital reserves; and

• US CMBS: Moody's Approach to Rating Fusion Transactions, April 19, 2005 -- this paper discusses the key ratings factors for fusion deals (large loan credit quality, composition and correlation of the large loan pool, and conduit diversity), value drivers for office and retail properties, valuation and cap rate issues, property type volatility, Moody's large loan tranching methodology, and an assessment of subordination levels.

These methodologies are available on Moody.com. The analysis of this transaction is consistent with Moody's published rating methodologies.

New York
Michael M. Gerdes
Senior Vice President
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

No Related Data.
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