Fitch Upgrades 2 Classes of MSCI 2004-HQ4

Fitch Ratings has upgraded two classes and affirmed seven classes of Morgan Stanley Capital I Trust's (MSCI) commercial mortgage pass-through certificates, series 2004-HQ4. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrades reflect the increased credit enhancement as a result of significant principal paydown since Fitch's last rating action in May 2014.

As of the October 2014 distribution date, the pool's aggregate principal balance has been reduced by 98.7% (including 3.6% of realized losses) to $18.2 million from $1.37 billion at issuance. Approximately $290 million in paydown, mostly from maturing loans, has occurred since the last rating action. Per the servicer reporting, one loan (22.9% of the pool) is defeased. Interest shortfalls in the amount of $1.46 million are currently affecting classes J through Q. Fitch has designated four loans (77.1%) as Fitch Loans of Concern which includes the three specially serviced loans, two of which transferred since the previous rating action.

Of the original 117 loans, five remain, three (56.1%) of which are in special servicing. The non-specially serviced loans have maturity dates in August 2016 (22.9%) and May 2034 (20.9%). The loan maturing in August 2016 is defeased.

The largest loan remaining in the pool is a specially serviced asset (28.5% of the pool), which is secured by a 44,206 square foot (sf) mixed-use retail/office property located in Glendale, CA. The loan was transferred to the special servicer in March 2014 due to imminent default caused by a drop in occupancy. Occupancy fell to 20% in March 2014 after a tenant occupying 39% of the net rentable area (NRA) vacated. In July, a letter of intent (LOI) was executed for the purchase of the property and in August the special servicer extended the forbearance period until Nov. 6, 2014 to allow time for the sale to be completed.

The largest non-defeased loan (20.9%) is a 46,688 sf neighborhood retail property located in Calumet Park, Illinois. The borrower did not pay off the loan at the anticipated repayment date (ARD) of May 1, 2015 and the actual maturity date is not until May 2034. The net operating income (NOI) debt service coverage ratio (DSCR) for 2013 was reported at 1.65x, down from 1.89x for YE December 2012. The decline is primarily due to a decline in occupancy from 100% to 67%, where it remains as of May 2014.

RATING SENSITIVITIES

Upgrades to classes G and H are supported by increased credit enhancement due to paydown from maturities and the percentage of defeased loans (22.9%) remaining in the pool. The Rating Outlook on class G is revised to Stable as no additional rating changes are expected due to increasing credit enhancement from continued paydown, which offsets concerns of pool concentration.

Fitch upgrades the following classes and assigns or revises Rating Outlooks and REs as indicated:

--$658,329 class G to 'Asf' from 'B-sf', Outlook to Stable from Negative;

--$12 million class H to 'CCCsf' from 'Csf', RE 100%.

Fitch affirms the following classes and assigns REs as indicated:

--$5.5 million class J at 'Dsf', RE 5%.

--$0 class K at 'Dsf', RE 0%;

--$0 class L at 'Dsf', RE 0%;

--$0 class M at 'Dsf', RE 0%;

--$0 class N at 'Dsf', RE 0%;

--$0 class O at 'Dsf', RE 0%;

--$0 class P at 'Dsf', RE 0%.

The class A1 to A-7, B, C, D, E and F certificates have paid in full. Fitch does not rate the class Q and S 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. 11, 2013 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. 11, 2013).

Applicable Criteria and Related Research:

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=724961

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=906374

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts:

Fitch Ratings
Primary Analyst
Darren Liss
Director
+1-212-908-0753
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Mary MacNeill
Managing Director
+1-212-908-0785
or
Media Relations
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.