Fitch Upgrades 2 Classes of Morgan Stanley Capital I, Series 1999-RM1

NEW YORK--(BUSINESS WIRE)--Fitch Ratings upgrades the following classes of Morgan Stanley commercial mortgage pass-through certificates, series 1999-RM1, as follows:

--$23.6 million class H to 'AA' from 'AA-'; Outlook Stable; and

--$8.6 million class J to 'A+' from 'A'; Outlook Stable.

In addition, Fitch affirms the following classes:

--Interest-only class X at 'AAA'; Outlook Stable;

--$7.5 million class F at 'AAA'; Outlook Stable;

--$10.7 million class G at 'AAA'; Outlook Stable;

--$12.9 million class K at 'BBB'; Outlook Stable;

--$6.4 million class L at 'BBB-' Outlook Stable;

--$8.6 million class M at 'B+'; Outlook Stable; and

--$8.6 million class N at 'CCC'.

Fitch does not rate the $5.3 million class O certificates. Classes A-1, A-2, B, C, D, and E have been paid in full.

The upgrades are based on increased credit enhancement as a result of significant paydown from loans that recently matured. The Rating Outlooks reflect the likely direction of any rating changes over the next one to two years. Currently, four loans (4.6%) are defeased. As of the January 2009 distribution date, the transaction has paid down 89% to $92.2 million from $859 million at issuance.

Fourteen loans (29.4%) are considered Fitch loans of concern, of which four are currently in special servicing (10.8%). The largest specially serviced loan (5.6%) is secured by an office property in Leonia, NJ. The loan transferred due to a maturity default in November 2008. The property is occupied by a single tenant with a lease that expires in April 2009. The borrower was unable to refinance the debt and has requested a one-year extension in order to have more time to lease and/or sell the property. The servicer is currently reviewing the borrower's request to extend.

The second loan (3.2%) in special servicing is secured by an office property in Waltham, MA that transferred due to a maturity default in November 2008. The borrower has not been able to secure financing and has requested either a one-year extension or a discounted payoff (DPO). The borrower has had a difficult time attracting tenants, and the property is currently 33% occupied by one tenant. The special servicer is currently reviewing the appraisal and negotiating a DPO with the borrower.

The next loan (1.4%) in special servicing was transferred in September 2008 for maturity default. The loan is secured by a warehouse in Akron OH. The sponsors of the loan passed away and the property manager has had difficulty contacting the owners' estates in regards to satisfying the outstanding mortgage debt. The special servicer is following a dual track of workout and foreclosure.

The final specially serviced loan (1.3%) is secured by a multifamily property in Atlanta, GA. The loan transferred in October 2008 for maturity default. The borrower has submitted a request for a maturity date extension after a planned refinance did not occur. The property manager reports that the property is 95% occupied and a recent property inspection reports the property to be in good condition.

Expected losses on the specially serviced assets are anticipated to be absorbed by the non-rated class O.

Fitch has identified 10 additional loans (19%) as Fitch Loans of Concern. These include loans with debt service coverage ratios (DSCRs) below 1.0 times (x), loans with Fitch stressed loan-to-value ratios greater than 100%, and loans with other performance issues. Of the Fitch Loans of Concern, two (1.8%) are scheduled to mature in 2009.

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