OREANDA-NEWS. Fitch Ratings has downgraded five and affirmed 12 classes of Morgan Stanley Capital I Trust (MSC 2007-IQ13) commercial mortgage pass-through certificates series 2007-IQ13. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS
The downgrade reflects higher expected losses on the pool primarily driven by the recent sale of the St. Louis Mills Mall. Fitch modeled losses of 16.4% of the remaining pool; expected losses on the original pool balance total 15.5%, including $69 million (4.2% of the original pool balance) in realized losses to date. Fitch has designated 19 loans (32.4%) as Fitch Loans of Concern, which includes six specially serviced assets (9.9%).

As of the February 2016 distribution date, the pool's aggregate principal balance has been reduced by 31.2% to $1.13 billion from $1.64 billion at issuance. Per the servicer reporting, 15 loans (13.5% of the pool) are defeased. Interest shortfalls are currently affecting classes D through G. 18.1% of the pool is scheduled to mature in 2016 with an additional 80% maturing in 2017.

The largest contributor to expected losses is a 1.2 million square foot (sf), outlet mall (6.9%) in Hazelwood, MO, a suburb of St. Louis. The real estate owned (REO) asset has sold this month and will be liquidated out of the trust with significant losses. Performance of the mall has deteriorated as a result of increased competition from two new outlet malls in nearby Chesterfield, MO and the departure of numerous in-line tenants. The asset has been REO since August 2012 and new competition has only precipitated the decline in occupancy and sales. The most recently reported occupancy as of year-end (YE) 2015 was 75% with in-line occupancy less than 50%. According to the servicer, the loss will be reflected in next month's remittance.

The next largest contributor to expected losses is the 75-101 Federal Street loan (18.6% of the pool), which is secured by a class A office building comprising 811,687 sf in Boston's financial district. As of September 2015, occupancy for the building improved to 85% from 80% at YE 2014; however, net operating income (NOI) remains insufficient to cover debt service with debt service coverage ratio (DSCR) of 0.83x. Rockpoint Group acquired the property in July 2015 and simultaneously assumed the debt. Although losses were modeled on the loan, refinance and default risk is mitigated by experienced sponsorship, strong loan structural features and a central CBD location. According to Reis' fourth quarter 2015 report, the Central Business District submarket of Boston had a vacancy rate of 8.5% with asking rents of $56.92 psf. The subject property underperforms the submarket with respect to occupancy and average in-place rents.

The third largest contributor to expected losses is a 92,486 sf suburban office property (1.3%) located in Annapolis, MD. The asset has been REO since October 2011. The largest tenant, which represents 60.4% of the property, has renewed their lease with an expansion of their space. As of February 2016, occupancy for the property was 92%. According to the special servicer, the asset is scheduled for auction this April.

RATING SENSITIVITIES
Rating Outlooks of classes A-1A through A-4 remain Stable due to increasing credit enhancement and continued paydown of the classes. The Negative Outlook reflects weaker credit metrics of the pool coupled with refinance risk as loans approach maturity in 2017. The distressed classes (those rated below 'B-sf') are subject to further downgrades as losses are realized.

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

Fitch downgrades the following classes and assigns Rating Outlooks as indicated:

--$163.9 million class A-M to 'Asf' from 'AAsf'; Outlook Negative;
--$149.6 million class A-J to 'Csf' from 'CCCsf'; RE 60%;
--$32.8 million class B to 'Csf' from 'CCCsf'; RE 0%;
--$16.4 million class C to 'Csf' from 'CCsf'; RE 0%;
--$10.9 million class G to 'Dsf' from 'Csf'; RE 0%.

Fitch affirms the following classes as indicated:

--$250 million class A-1A at 'AAAsf'; Outlook Stable;
--$5.9 million class A-3 at 'AAAsf'; Outlook Stable;
--$448.8 million class A-4 at 'AAAsf'; Outlook Stable;
--$16.4 million class D at 'Csf'; RE 0%;
--$14.3 million class E at 'Csf'; RE 0%;
--$18.4 million class F at 'Csf'; RE 0%;
--$0 class H at 'Dsf'; RE 0%;
--$0 class J at 'Dsf'; RE 0%;
--$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%.

Fitch does not rate the class O and P certificates. Classes A-1 and A-2 have paid in full. Fitch previously withdrew the ratings on the interest-only class X and X-Y certificates.