Fitch Ratings has upgraded three classes, affirmed six classes and downgraded two distressed classes of Morgan Stanley Capital I Trust commercial mortgage pass-through certificates, series 2004-TOP13. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The upgrades are due to increased credit enhancement and continued paydown while the downgrades reflect the increased likelihood of losses to the classes. Fitch modeled losses of 8.2% of the remaining pool; expected losses on the original pool balance total 1.5%, including $10.3 million (0.9% of the original pool balance) in realized losses to date. There are currently no specially serviced loans; however, Fitch has designated five loans (17.5%) as Fitch Loans of Concern.
As of the December 2014 distribution date, the pool's aggregate principal balance has been reduced by 92.6% to $89.1 million from $1.21 billion at issuance. Per the servicer reporting, two loans (4.1% of the pool) are defeased. Interest shortfalls are currently affecting class P.
The largest remaining loan is secured by a 295,606 square foot (sf) office property built in 2003 and located in Omaha, NE. The property is 100% occupied by Gallup, Inc., a research-based management consulting company known for their public opinion polls. Gallup, Inc. has occupied the property since it was constructed in 2003. The property continues to perform as expected with a year-to-date June 2014 net operating income debt service coverage ratio (NOI DSCR) of 1.63x and a year-end 2013 NOI DSCR of 1.31x. The loan is structured as a 15-year stepped self-amortizing loan. From December 2013 through its maturity of November 2018, the payment increased to reflect an amortization schedule of approximately five years. Gallup's lease is co-terminus with the maturity date.
The largest contributor to expected losses is secured by an 85,381 sf retail property located in Arlington, WA. Major tenants include Power Alley Fitness (19.3% of net rentable area [NRA] with a lease maturity of April 2019), The Warm Beach Community Church (19.2% NRA with a lease maturity of August 2023) and Northwest Dance and Acro (6.7% NRA with a lease maturity of July 2018). The loan was previously transferred to special servicing in January 2013 for imminent monetary default; however, a November 2013 modification was closed and the loan was transferred back to the master servicer in January 2014. The modification extended the loan through November 2015 with interest only payments based on a 5.83% rate. As of June 2014, the property was 75% occupied and reported a year-to-date NOI DSCR of 0.94x.
RATING SENSITIVITIES
The Positive Rating Outlooks on classes E and H represent likely upgrades should the pool continue to perform as expected. Rating Outlooks on classes D, F, G, J, K and L are Stable due to increasing credit enhancement, defeasance, and continued paydown.
Fitch upgrades the following classes and assigns Rating Outlooks as indicated:
--$9.1 million class F to 'AAsf' from 'Asf'; Outlook Stable;
--$10.6 million class G to 'Asf' from 'BBBsf'; Outlook Stable;
--$3 million class L to 'Bsf' from 'CCCsf'; Assigned Outlook Stable.
Fitch downgrades the following distressed classes and assigns Recovery Estimates (REs) as indicated:
--$4.5 million class N to 'CCsf' from 'CCCsf'; RE 100%;
--$3 million class O to 'Csf' from 'CCsf'; RE 20%.
Fitch affirms the following classes and assigns Rating Outlooks and Recovery Estimates (RE) as indicated:
--$20.7 million class D at 'AAAsf'; Outlook Stable;
--$12.1 million class E at 'AAsf'; Outlook to Positive from Stable;
--$9.1 million class H at 'BBsf'; Outlook to Positive from Stable;
--$9.1 million class J at 'BBsf'; Outlook Stable;
--$3 million class K at 'Bsf'; Outlook Stable;
--$3 million class M at 'CCCsf'; RE 100%.
The class A-1, A-2, A-3, A-4, B and C certificates have paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the ratings on the interest-only class X-1 and X-2 certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 10, 2014 report, 'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria', which is available at 'www.fitchratings.com' under the following headers:
Structured Finance >> CMBS >> Criteria Reports
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 4, 2014);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 10, 2014).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=971035
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