OREANDA-NEWS. Fitch Ratings has upgraded six classes and affirmed two classes of Morgan Stanley Capital I Trust (MSC) commercial mortgage pass-through certificates series 2003-IQ5. 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 as a result of continued paydown. The affirmations of class M and N reflect the concentrated nature of the pool and the uncertainty of losses associated with the specially services loans. Fitch modeled losses of 15.4% of the remaining pool; expected losses on the original pool balance total 0.9%, including \$1.5 million (0.2% of the original pool balance) in realized losses to date.

The pool is concentrated with only 17 loans remaining, 80.3% of which are fully amortizing. Fitch has designated three loans (16.6%) as Fitch Loans of Concern, which includes two specially serviced assets (19.7%). The largest loan in the pool is the \$18.6 million (49.5% of pool) pari passu portion of 3 Times Square (totaling \$90.5 million). The loan is fully amortizing through its October 2021 maturity date.

As of the January 2015 distribution date, the pool's aggregate principal balance has been reduced by 95.2% to \$37.6 million from \$778.8 million at issuance. No loans are defeased. Interest shortfalls are currently affecting class O.

The two largest contributors to expected losses are the two crossed collateralized specially-serviced loans (19.7% of the pool). The loans are secured by a 59,998 square foot (sf) and a 59,663 sf office building located in Fairborn, OH, which is approximately eight miles north of Dayton. The crossed loans transferred to special servicing in April 2013 due to maturity default. As of September 2014, total occupancy at the two properties was reported to be 57%. The special servicer is currently waiting for the court to approve a sale through receivership, which is expected to occur in mid-February 2015.

The third largest contributor to expected losses is a loan secured by a 50,959 sf retail property in Arlington, TX (9.2% of the pool). The property is adjacent to a Super Target and across from The Parks at Arlington, a 1.5 million sf regional mall anchored by Macy's Nordstrom, JC Penney and Dillard's. As of September 2014, occupancy was reported to be 66%, which is a decrease from the 88% reported in September 2013. Additionally, the debt service coverage ratio was reported to be 0.88x, down from 1.10x reported at year end 2013.

RATING SENSITIVITIES

Rating Outlooks on classes F through L remain Stable due to increasing credit enhancement and continued paydown. Rating Outlooks on classes M and N have been revised to Stable from Negative due to the ability of the subordinate class NR to absorb any potential losses from the specially serviced loans.

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

--\$4.1 million class F to 'AAAsf' from 'A-sf', Outlook to Stable from Positive;
--\$7.8 million class G to 'AAAsf' from 'BBBsf', Outlook to Stable from Positive;
--\$5.8 million class H to 'AAsf' from 'BBB-sf', Outlook Stable;
--\$2.9 million class J to 'Asf' from 'BB+sf', Outlook Stable;
--\$4.9 million class K to 'BBBsf' from 'BBsf', Outlook Stable;
--\$2.9 million class L to 'BBsf' from 'B+sf', Outlook Stable.

Fitch affirms the following classes and revises Rating Outlooks as indicated:

--\$1.9 million class M at 'Bsf', Outlook to Stable from Negative;
--\$974,000 class N at 'B-sf', Outlook to Stable from Negative.

The class A-1, A-2, A-3, A-4, B, C, D and E certificates have paid in full. Fitch does not rate the class O 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