Approximately $13.9 Million of Structured Securities Affected
New York, June 06, 2013 -- Moody's Investors Service upgraded the ratings of three classes and affirmed
two classes of Morgan Stanley Capital I Inc., Commercial
Mortgage Pass-through Certificates, Series 2001-IQ
as follows:
Cl. K, Upgraded to Aa2 (sf); previously on Jul 7,
2011 Upgraded to A2 (sf)
Cl. L, Upgraded to Baa1 (sf); previously on Jul 7,
2011 Upgraded to Ba1 (sf)
Cl. M, Upgraded to B3 (sf); previously on Jul 7,
2011 Upgraded to Caa1 (sf)
Cl. N, Affirmed Caa3 (sf); previously on Jul 7,
2011 Upgraded to Caa3 (sf)
Cl. X-1, Affirmed Caa1 (sf); previously on Feb
22, 2012 Downgraded to Caa1 (sf)
RATINGS RATIONALE
The upgrades to the three principal and interest classes are due to increased
credit support from amortization and pay downs.
The rating of Class N is consistent with Moody's expected loss and is
thus affirmed. The rating of the IO Class, Class X-1,
is consistent with the weighted average rating factor (WARF) of its referenced
classes and is thus affirmed.
Moody's rating action reflects a base expected loss of 2.6%
of the current balance compared to 2.0% at last review.
Base expected loss plus realized losses to date now totals 0.6%
of the original balance, the same as at last review. Moody's
provides a current list of base expected losses for conduit and fusion
CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
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 extent of growth in
the current macroeconomic environment given the weak pace of recovery
in the commercial real estate property markets. Commercial real
estate property values are continuing to move in a modestly positive direction
along with a rise in investment activity and stabilization in core property
type performance. Limited new construction and moderate job growth
have aided this improvement. However, a consistent upward
trend will not be evident until the volume of investment activity steadily
increases for a significant period, non-performing properties
are cleared from the pipeline, and fears of a Euro area recession
are abated.
The principal methodology used in this rating was "Moody's Approach to
Rating U.S. CMBS Conduit Transactions" published in September
2000. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
Moody's review incorporated the use of the excel-based CMBS Conduit
Model v 2.62 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 pay down 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 assessments is melded with the conduit model credit enhancement
into an overall model result. Fusion loan credit enhancement is
based on the credit assessment 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 assessment level,
is incorporated for loans with similar credit assessments 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 5 compared
to 6 at last review.
In cases where the Herf falls below 20, Moody's employs the large
loan/single borrower methodology. This methodology uses the excel-based
Large Loan Model v 8.5. 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 a review utilizing MOST®
(Moody's Surveillance Trends) Reports and a proprietary program that highlights
significant credit changes that have occurred in the last month as well
as cumulative changes since the last full transaction review. On
a periodic basis, Moody's also performs a full transaction
review that involves a rating committee and a press release. Moody's
prior transaction review is summarized in a press release dated June 15,
2012. 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 May 20, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 98% to $13.9
million from $713.0 million at securitization. The
Certificates are collateralized by six mortgage loans ranging in size
from less than 1% to 32% of the pool.
There are three loans, representing 58% of the pool,
on the master servicer's watchlist. The watchlist also 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.
Six loans have been liquidated from the pool since securitization resulting
in an aggregate realized loss totaling $3.7 million (average
loss severity of .5%). There are no loans in special
servicing and Moody's has not identified any troubled loans.
Moody's was provided with full year 2011 and full and partial year 2012
operating results for 68% and 50% of the performing pool,
respectively. Moody's weighted average conduit LTV is 55%
compared to 53% at last review. Moody's net cash flow reflects
a weighted average haircut of 10.7% to the most recently
available net operating income. Moody's value reflects a weighted
average capitalization rate of 9.7%.
Moody's actual and stressed conduit DSCRs are 1.15X and 3.30X,
respectively, compared to 1.25X and 3.76X, respectively,
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 top three conduit loans represent 70% of the pool balance.
The largest loan is the Providence Office Building ($4.5
million -- 32.3% of the pool), which is secured
by a 54,597 square foot (SF) office property located in Charlotte,
North Carolina. The property was 73% leased as of May 2011
compared to 80% at last review. The loan has amortized 22%
since securitization. Moody's LTV and stressed DSCR are 110%
and 0.99 X, respectively, compared to 113% and
0.95X at last review.
The second largest loan is the Union Square Shopping Center ($3.4
million -- 24.4% of the pool), which is secured
by a 267,875 SF retail property located in New Castle, Pennsylvania,
approximately 50 miles northwest of Pittsburgh. As of September
2012, the property was 99.5% leased, the same
as at last review. The three largest tenants are Wal Mart,
Staples and Fashion Bug. Performance has remained stable.
The loan is fully amortizing and has amortized 70% since securitization.
Moody's LTV and stressed DSCR are 22% and 4.0X, compared
to 26% and 3.85X at last review.
The third largest conduit loan is the Grassmere Business Park Loan ($1.8
million -- 12.8% of the pool), which is secured
by a 38,030 SF office building in Nashville, Tennessee.
The property was 74% leased as of February 2013, the same
at last review. Property performance increased slightly since last
review and the loan benefits from amortization. Moody's LTV
and stressed DSCR are 64% and 1.7X, respectively,
compared to 71% and 1.53X at last review.
REGULATORY DISCLOSURES
Moody's did not receive or take into account a third-party
assessment on the due diligence performed regarding the underlying assets
or financial instruments related to the monitoring of this transaction
in the past six months.
In conducting surveillance of this credit, Moody's considered performance
data contained in servicer and remittance reports. Moody's obtains
servicer reports on this transaction on a periodic basis, at least
annually.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Gregory Reed
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Michael Gerdes
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
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 Upgrades Three and Affirms Two CMBS Classes of MSC 2001-IQ
