Fitch Affirms MSCI 2011-C2

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed 11 classes of Morgan Stanley Capital I Trust (MSCI) commercial mortgage pass-through certificates series 2011-C2. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

Affirmations are due to the relatively stable performance of the pool. Despite recent paydown, upgrades were not warranted as the pool is becoming adversely selected. The pool has a high concentration of loans secured by retail properties (45% of the current balance), and properties located in Texas (36.5%) along with three large loans of concern detailed below.

Fitch modeled losses of 3.3% of the remaining pool; expected losses on the original pool balance total 3%. The pool has experienced no realized losses to date. Fitch has designated four loans (15.1%) as Fitch Loans of Concern, which includes one specially serviced loan (4.3%). Interest shortfalls are currently affecting class J.

As of the February 2016 distribution date, the pool's aggregate principal balance has been reduced by 10.5% to $1.09 billion from $1.21 billion at issuance. Per the servicer reporting, two loans (1% of the pool) are defeased.

The largest Fitch Loan of Concern is the Three Riverway Office loan (4.6%), secured by 398,413 square foot (sf) office building located in Houston, TX. Per servicer reporting, the net operating income (NOI) debt service coverage ratio (DSCR) decreased to 1.67x as of year-end (YE) 2014 from 1.75x as of YE 2013. The property has substantial lease turnover coming in the next two years as 28% of net rentable area (NRA) rolls in the coming year, followed by another 25% the next. Another concern is the property's high percentage of energy and commodity related tenants (34% of NRA) given the sectors' recent weakness. As of December 2015, the property was 90% occupied. Fitch will continue to monitor the loan for leasing updates and further deterioration in performance.

The next largest loan of concern is the Towne West Square Mall loan (4.4%), secured by a 945,000 sf (448,760 sf of collateral) regional mall located in Wichita, KS. The subject mall was anchored by Dillard's, JCPenney, Sears, and Dick's Sporting Goods, with only Sears included in the collateral for this loan. Per servicer reporting, collateral occupancy dropped to 53% as of the December 2015 rent roll from 78% as of YE 2014 after Sears vacated their space at the end of their lease in April 2015. As of December 2014, the NOI DSCR was 1.58x and 1.32x as of September 2015.

The third largest loan of concern is the specially serviced Georgetown Center loan (4.3%) secured by two office buildings located in Washington, D.C., and totalling 284,979 sf. The loan transferred to the special servicer in January 2016 due to imminent maturity default. As of September 2015, occupancy at the property was 93%. Fannie Mae (31% of portfolio NRA) and Georgetown University (32%) are the major tenants at the two buildings. Fannie Mae has made it public that they intend to consolidate their various locations throughout the Washington, DC metropolitan area into one location within DC's Central Business District (CBD). The special servicer is in the process of finalizing a modification that would extend the original maturity date of April 2016. Once the modification has received approval, it is anticipated that this loan will transfer back to the master servicer.

RATING SENSITIVITIES

The Rating Outlooks on classes A2 through H remain Stable as credit enhancement is high and downgrades are not expected. Upgrades are possible with stable pool performance, increased credit enhancement, and/or resolution of the specially serviced loan. Downgrades are possible if the Loans of Concern experience a further deterioration in performance and losses begin to be realized.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

Fitch affirms the following classes as indicated:

--$303.3 million class A-2 at 'AAAsf'; Outlook Stable;

--$89 million class A-3 at 'AAAsf'; Outlook Stable;

--$439.5 million class A-4 at 'AAAsf'; Outlook Stable;

--$831.8 million* class X-A at 'AAAsf'; Outlook Stable;

--$45.5 million class B at 'AAsf'; Outlook Stable;

--$50.1 million class C to 'Asf'; Outlook Stable;

--$31.9 million class D at 'BBB+sf'; Outlook Stable;

--$50.1 million class E at 'BBB-sf'; Outlook Stable;

--$15.2 million class F at 'BB+sf'; Outlook Stable;

--$12.1 million class G at 'BBsf'; Outlook Stable;

--$15.2 million class H at 'B-sf'; Outlook Stable.

*Notional amount and interest-only

The class A-1 certificates have paid in full. Fitch does not rate the class J and X-B certificates.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873395

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1000763

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1000763

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160310006589/en/

Fitch Ratings
Primary Analyst
Zachary Johnson
Associate Director
+1-646-582-4815
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, New York, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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