Fitch Upgrades Four Classes and Affirms Seven in MSCI 2004-TOP13

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has upgraded four classes and affirmed seven 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 follow continued amortization, decreasing leverage and increasing credit enhancement to the bonds. Despite the improved subordination and expected continued paydown, Fitch limited its upgrade actions to four classes and affirmed the remaining seven based on binary risk associated with the pool's concentrated nature.

Concentration Concerns: The pool is highly concentrated by loan size, as well as property type and location. The largest five loans make up 63.5% of the pool, and 66.5% of pool is secured by retail properties. Nearly all of the underlying collateral is situated in secondary or tertiary markets. Additionally, 10% of the pool is secured by assets considered to have single-tenant exposure. The concern surrounding this concentration is compounded by the small tranche size of the most junior bonds.

Continued Amortization: The pool has experienced 94.3% collateral reduction since issuance. Since the last review, one loan has repaid from the trust. A second loan, representing 5.1% of the pool balance, is scheduled to mature in November and is expected to repay. Additionally, one asset representing 3.2% of the pool was defeased. In total, there are now five defeased loans, representing 11% of the pool. Leverage is considered relatively low, with a weighted-average loan to value (LTV) of 65.7%. Loans representing 21.6% of the pool are fully amortizing. The majority of the pool is scheduled to mature in 2018.

The largest contributor to expected loss is Faisal Apartment Portfolio. The loan, which represents 14.9% of the pool, is secured by a portfolio of seven multifamily properties located throughout the Boston area, including the Allston-Brighton, South End and Brookline neighborhoods. The loan has been on and off the watchlist several times since 2009 for fluctuations in cash flow and deferred maintenance; however, it has never been delinquent. The borrower has not submitted financial reporting for the 2014 or 2015 fiscal years. The YE2013 DSCR was reported to be 1.12x at an occupancy rate of 98%.

RATING SENSITIVITIES

The Rating Outlook on class G was revised to Positive from Stable, and the Rating Outlook for all other classes remains Stable. Defeasance, fully amortizing debt and loans expected to repay in the near term represent 32% of the current pool balance. There is binary risk associated with the wave of loan maturities occurring in 2018 and the pool's concentration by loan size. While upgrades based solely on improved loan level performance are unlikely given the quality of the remaining collateral, an upgrade based on increased amortization is believed likely for class G and possible other classes, should loans deemed at risk of default successfully repay at maturity. Distressed classes may be subject to downgrades as losses are realized.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10

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

Fitch has upgraded the following ratings and revised Outlooks as indicated:

--$9.1 million class F to 'AAAsf' from 'AAsf'; Outlook Stable;

--$10.6 million class G to 'AAsf' from 'Asf'; Outlook revised to Positive from Stable;

--$ 9.1 million class H to 'Asf' from 'BBBsf'; Outlook Stable;

--$9.1 million class J to 'BBBsf' from 'BBsf'; Outlook Stable;

Fitch has affirmed the following ratings:

--$615,945 class D at 'AAAsf'; Outlook Stable;

--$12.1 million class E at 'AAAsf'; Outlook Stable;

--$3 million class K at 'BBsf'; Outlook Stable;

--$3 million class L at 'Bsf'; Outlook Stable;

--$3 million class M at 'Bsf'; Outlook Stable;

--$4.5 million class N at 'CCsf'; RE 100%;

--$3 million class O at 'Csf'; RE 20%.

The class A-1, A-2, A-3, A-4, B and C certificates have been paid in full. Fitch does not rate the class P certificate. Fitch previously withdrew the ratings on the interest-only class X-1 and X-2 certificates.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)

https://www.fitchratings.com/site/re/886006

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)

https://www.fitchratings.com/site/re/882401

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/site/re/883130

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

https://www.fitchratings.com/site/re/873395

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1013945

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1013945

Endorsement Policy

https://www.fitchratings.com/regulatory

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Source: Fitch Ratings

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