NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed all classes of Morgan Stanley Capital I Trust, 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 affirmations reflect concerns of pool concentration and adverse selection as many of the remaining properties are specially serviced and/or located in secondary or tertiary markets despite the increased credit enhancement from loan repayments and better recoveries than previously modeled on loans disposed since Fitch's last rating action.
Fitch modeled losses of 48.1% of the remaining pool; expected losses on the original pool balance total 6.1%, including $130.3 million (4.7% of original pool) of realized losses to date. Since the last rating action, total paydowns were $769.4 million and realized losses were $7.9 million.
As of the November 2015 distribution date, the pool's aggregate principal balance has been reduced by 97.3% to $75.4 million from $2.75 billion at issuance. Of the original 177 loans, the pool is concentrated with eight loans remaining, five of which are currently in special servicing (60% of current pool). Cumulative interest shortfalls totaling $9.8 million are currently impacting classes J through S.
The largest contributor to Fitch-modeled losses, which remains the same since the last rating action, is the County Line Commerce Center asset (28.8% of pool). The asset is a 426,384 square foot 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 September 2010.
As of the September 2015 rent roll, the asset was 63.4% occupied, an improvement from the 58.8% at Fitch's last rating action as of November 2014, but still represents a decline from 74% at issuance. The increased occupancy was primarily due to the renewal and expansion of the largest tenant, which extended its lease for an additional 10 years to March 2025. The market has been flat for the past few years with little leasing or sales velocity. Office rent for the asset is lower than comparable office space in the market due to awkward spacing and a lack of windows. Additionally, the Environmental Protection Agency issued its five-year report for the asset recommending further ground water and vapor intrusion testing. The special servicer expects to put the asset up for sale and dispose during the first half of 2016.
The three non-specially serviced loans are comprised of two multifamily loans (33.8%) with a related borrower located in Viera, FL and Middleburg, FL, and a retail loan (6.2%) located in Bristol, VA anchored by a Food City supermarket.
Future upgrades are possible as the specially serviced loans are resolved and disposed. Conversely, classes may also be downgraded if additional losses are realized or if losses exceed Fitch's expectations.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed the following classes:
--$30.2 million class H at 'CCCsf'; RE 100%;
--$31 million class J at 'CCsf'; RE 30%.
--$14.3 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, A-1A, A-2A, A-2B, A-AB, A-3, A-4A, A-4B, A-J, B, C, D, E, F, and G 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 is available at www.fitchratings.com.
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