Fitch Upgrades 2 Classes of Nomura Asset Sec Corp's 1996-MDV.

NEW YORK -- Fitch Ratings upgrades Nomura Asset Securities Corp.'s commercial mortgage pass-through certificates, series 1996-MDV as follows:

-- $48.7 million class B-1 to 'AAA' from 'AA';

-- $33.7 million class B-2 to 'BB+' from 'BB'.

In addition, the following classes are affirmed:

-- $11.2 million class A-1A at 'AAA';

-- $352 million class A-1B at 'AAA';

-- $7.5 million class A-1C at 'AAA';

-- Interest-only classes CS-1 and CS-2 at 'AAA';

-- $45 million class A-2 at 'AAA';

-- $52.4 million class A-3 at 'AAA';

-- $48.7 million class A-4 at 'AAA';

-- $11.2 million class A-5 at 'AAA'.

The class S-1 is paid in full; Fitch does not rate class B-2H.

The upgrades are due to the defeasance of the Buena Vista Palace loan (6.4%) and the improved performance of the remaining collateral.

As of the August 2005 distribution date, the pool's total principal balance has been reduced by 21.1% to $610.4 million from $773.7 million at issuance, due to the repayment of one loan and amortization on eight of the nine remaining fixed-rate loans. The collateral consists of government securities (91.3%) from the full defeasance of seven loans and partial defeasance of one loan and two crossed pool loans secured by 11 geographically diverse properties.

Although net cash flow (NCF) and occupancy of the Horizon loan (9.1%) have declined since issuance, it is partially defeased with three of its original four factory outlet centers remaining. After accounting for the defeasance and amortization, the year-end (YE) 2004 Fitch debt service coverage ratio (DSCR) was 1.77 times (x) compared to 1.55x at issuance. The average occupancy for the remaining properties, however, has declined to 78.6% as of YE 2004 compared to 86.7% at YE 2003.

The Innkeepers Portfolio loan (3.9%) is collateralized by eight extended stay hotels. Although the adjusted NCF for YE 2004 has declined 26.5% since issuance, the trend since 2003 is positive primarily due to the recovering performance of three hotels located in the San Jose, California market (39% of allocated loan balance). The corresponding DSCR remains strong at 2.36x compared to 2.41x at issuance.

As part of its review, Fitch analyzed the performance of each loan and the underlying collateral. Fitch compared each loan's stressed DSCR for the YE December 2004 to the DSCR at issuance. DSCRs are based on Fitch adjusted NCF and a stressed debt service based on the current loan balance.

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