Fitch Upgrades 3 Classes of Morgan Stanley Capital 1998-WF2

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has upgraded three classes of commercial pass-through certificates from Morgan Stanley Capital I Inc., series 1998-WF2 as follows:

-- $23.9 million class G to 'AAA' from 'AA-';

-- $10.6 million class H to 'AA' from 'A-';

-- $8 million class J to 'A' from 'BBB'.

Additionally, Fitch has affirmed the following classes:

-- Interest only (IO) class X at 'AAA';

-- $19.3 million class D at 'AAA';

-- $21.2 million class E at 'AAA';

-- $21.2 million class F at 'AAA';

-- $8 million class K at 'BB+';

-- $15.9 million class L at 'B-'.

The $5.3 million class M remains at 'CCC/DR2'.

Fitch does not rate the $2.5 million class N certificates. Classes A-1, A-2, B and C have been paid in full.

The upgrades reflect increased credit enhancement due to scheduled amortization and loan payoffs since Fitch's last review and reflect the stable performance of the outstanding loans. As of the August 2008 distribution date, the pool's aggregate balance has been reduced 87.2%, to $136 million from $1.06 billion at issuance. One loan has defeased (9.1%).

Fitch has identified two Loans of Concern (2.8%), including one specially serviced asset (1.4%). The specially serviced asset is a real estate owned (REO) asset with losses expected. The loan is secured by a retail property located in Lansing, MI and remains 100% vacant since 2002. Recent valuations of the asset indicate losses upon liquidation.

The largest Loan of Concern (1.4%) is secured by retail property in Indianapolis, IN. Occupancy as of year-end (YE) 2007 was 70%.

The largest remaining loan (27.3%) is an office property located in Washington, D.C. The fully amortizing loan is scheduled to mature in 2023 and had a servicer reported YE 2007 debt service coverage ratio (DSCR) of 1.61 times (x).

The second largest remaining loan (11.1%) is secured by a hotel property in San Diego, CA. The loan is scheduled to mature in 2013 and had a servicer reported YE 2007 DSCR of 1.78x.

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