Fitch Upgrades One Class of MSCI 2005-HQ6

NEW YORK--()--Fitch Ratings has upgraded one class and affirmed 22 classes of Morgan Stanley Capital I Trust's commercial mortgage pass-through certificates, series 2005-HQ6 (MSCI 2005-HQ6). A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrade reflects a decrease in Fitch-modeled losses and continued stable collateral performance since the last rating action. Fitch modeled losses of 5.3% of the remaining pool; expected losses on the original pool balance total 8.1%, including $117.9 million of realized losses to date. Fitch had modeled losses of 8.6% of the original pool balance at the last rating action. Fitch has designated 69 loans (24%) as Fitch Loans of Concern, which includes seven specially serviced assets (2.5%).

As of the February 2014 distribution date, the pool's aggregate principal balance has been reduced by 26.9% to $2.01 billion from $2.75 billion at issuance. According to the servicing report, 14 loans (7% of pool) are defeased. Cumulative interest shortfalls totaling approximately $9.5 million are currently impacting classes J through S.

The largest contributor to modeled losses is the largest specially serviced asset, County Line Commerce Center (1.1% of pool). The asset is a 426,384 square foot (sf) office and industrial property located in Hatboro, PA. The loan was transferred to special servicing in March 2009 for imminent default and became real-estate owned in 2010.

As of the December 2013 rent roll, the property was 60.2% occupied by five tenants, down from 74.1% at issuance. The servicer indicated the strategy is to renew and extend some of the leases with upcoming expirations and then attempt to sell the asset. Two tenants comprising 23% of the total property square footage have leases expiring in 2015. Prior efforts to market the property have been unsuccessful.

The next largest contributor to modeled losses is the Skyline Industrial loan (1.1%), which is secured by two industrial/warehouse buildings totaling 930,100 sf located in Mesquite, TX. The two buildings both became vacant during 2011 when the two tenants from issuance vacated at lease expiration. The loan has never been in special servicing as the borrowers have been coming out of pocket to cover shortfalls.

In early 2012, a short-term lease expiring in October 2013 was executed at the larger of the two buildings for 530,100 sf with Quaker Sales & Distribution (Quaker). In early 2013, another short-term lease expiring in September 2013 was executed at the smaller of the two buildings for 400,000 sf with Hayes Retail Services (Hayes).

As of the February 2014 rent roll, the property was 57% occupied. Quaker has since vacated the 530,100 sf building. Hayes also vacated the 400,000 sf building; however, they took over and moved into the former Quaker space and executed a new lease that expires in November 2016. The 400,000 sf building is currently vacant.

The servicer indicated there have been some leasing prospects. According to REIS and as of fourth quarter-2013 (4Q'13), the Central Dallas SE warehouse/distribution submarket reported a vacancy of 33.1% and asking rents of $3.66 psf. The initial starting base rent for the newly executed Hayes Retail Services lease is below market, but has annual scheduled rent bumps. Given the new leasing, modeled losses on this loan have declined since the last rating action.

The third largest contributor to modeled losses is the Mansell Village loan (0.8%). The loan is secured by a 98,614 sf retail property located in Roswell, GA. The loan previously transferred to special servicing in June 2010 for imminent default and was modified into an A and a B note in 2011. Occupancy has gradually recovered, but remains below the 98.5% reported at issuance.

As of June 2013, occupancy was 86% compared to 84% at year-end (YE) 2012 and 78% at YE 2011. The property is anchored by a Kroger's supermarket (63.3% of NRA), which is on a long-term lease, but the remaining tenant base is comprised of smaller tenants. According to REIS and as of 4Q13, the Sandy Springs/North Fulton anchored retail submarket of Atlanta reported a vacancy of 10.6%. Fitch modeled a full loss on the B-note portion.

RATING SENSITIVITIES

Ratings are expected to remain stable due to sufficient credit enhancement, stable performance and continued paydown. Fitch revised the Rating Outlook on class B to Positive from Stable as future upgrades may be warranted if collateral performance continues to remain stable or improve. Distressed classes (those rated below 'B') may be subject to downgrades as losses are realized or if realized losses are greater than Fitch's expectations. Conversely, if performance continues to improve or if loans payoff at their near-term maturity (with 93% maturing prior to 2016), upgrades may be warranted on the already distressed classes with the highest credit enhancement.

Fitch has upgraded the following class as indicated:

--$34.4 million class C to 'BBBsf' from 'BBB-sf'; Outlook Stable.

Fitch has affirmed and revised Rating Outlooks on the following classes as indicated:

--$163.9 million class A-1A at 'AAAsf'; Outlook Stable;

--$36.9 million class A-2A at 'AAAsf'; Outlook Stable;

--$42.1 million class A-2B at 'AAAsf'; Outlook Stable;

--$22.2 million class A-AB at 'AAAsf'; Outlook Stable;

--$103 million class A-3 at 'AAAsf'; Outlook Stable;

--$1.1 billion class A-4A at 'AAAsf'; Outlook Stable;

--$151.5 million class A-4B at 'AAAsf'; Outlook Stable;

--$175.6 million class A-J at 'Asf'; Outlook Stable;

--$24.1 million class B at 'BBBsf'; Outlook to Positive from Stable;

--$27.5 million class D at 'BBsf'; Outlook to Stable from Negative;

--$24.1 million class E at 'Bsf'; Outlook to Stable from Negative;

--$27.5 million class F at 'CCCsf'; RE 100%;

--$27.5 million class G at 'CCCsf'; RE 0%;

--$34.4 million class H at 'CCCsf'; RE 0%;

--$31 million class J at 'CCCsf'; RE 0%;

--$26.7 million 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%;

--$0 class O at 'Dsf'; RE 0%;

--$0 class P at 'Dsf'; RE 0%;

--$0 class Q at 'Dsf'; RE 0%.

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

Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 11, 2013 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

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 24, 2013);

--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=821963

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Media Relations
Sandro Scenga, New York
Tel: +1 212-908-0278
Email: sandro.scenga@fitchratings.com
or
Primary Analyst
Melissa Che
Director
+1-212-612-7862
Fitch Ratings, Inc., One State Street Plaza, New York, NY 10004
or
Committee Chairperson
Mary MacNeill
Managing Director
+1-212-908-0785

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Contacts

Fitch Ratings
Media Relations
Sandro Scenga, New York
Tel: +1 212-908-0278
Email: sandro.scenga@fitchratings.com
or
Primary Analyst
Melissa Che
Director
+1-212-612-7862
Fitch Ratings, Inc., One State Street Plaza, New York, NY 10004
or
Committee Chairperson
Mary MacNeill
Managing Director
+1-212-908-0785