Fitch Affirms Morgan Stanley Capital 1 Trust Series 2007-HQ12; Assigns Outlooks

Business Wire, Oct 15, 2008

NEW YORK -- Fitch Ratings affirms and assigns Outlooks to Morgan Stanley Capital 1 Trust series 2007-HQ12 commercial mortgage pass-through certificates as follows:

--$38.1 million class A-1 at 'AAA'; Outlook Stable;

--$364.9 million class A-1A at 'AAA'; Outlook Stable;

--$289.1 million class A-2 at 'AAA'; Outlook Stable;

--$395.0 million class A-2FL at 'AAA'; Outlook Stable;

--$131.5 million class A-3 at 'AAA'; Outlook Stable;

--$66.4 million class A-4 at 'AAA'; Outlook Stable;

--$83.0 million class A-5 at 'AAA'; Outlook Stable;

--$170.9 million class A-M at 'AAA'; Outlook Stable;

--$25.0 million class A-MFL at 'AAA'; Outlook Stable;

--$53.0 million class A-J at 'AAA"; Outlook Stable;

--$91.4 million class A-JFL at 'AAA'; Outlook Stable;

--$1,955.5 million class X at 'AAA'; Outlook Stable;

--$41.6 million class B at 'AA'; Outlook Stable;

--$22.0 million class C at 'AA-'; Outlook Stable;

--$24.5 million class D at 'A'; Outlook Stable;

--$14.7 million class E at 'A-'; Outlook Stable;

--$24.5 million class F at 'BBB '; Outlook Stable;

--$22.0 million class G at 'BBB'; Outlook Negative;

--$22.0 million class H at 'BBB-'; Outlook Negative;

--$14.7 million class J at 'BB '; Outlook Negative;

--$4.9 million class K at 'BB'; Outlook Negative;

--$7.3 million class L at 'BB'-; Outlook Negative;

--$4.9 million class M at 'B '; Outlook Negative;

--$4.9 million class N at 'B'; Outlook Negative;

--$4.9 million class O at 'B-'; Outlook Negative;

The $4.9 million P and Q classes remain 'CCC'.

Fitch does not rate class S.

The affirmations are the result of stable performance and minimal paydown since issuance. Rating Outlooks reflect the likely direction of any rating changes over the next one to two years. As of the September 2008 distribution date, the transaction has paid down 0.15% to $1.956 billion. The collateral consists of 100 loans on multifamily and commercial real estate properties in 31 states. There are currently no delinquent or specially serviced loans.

Fitch reviewed the transaction's four shadow rated loans and their underlying collateral: 529 Fifth Avenue (3.32%), Deptford Mall (3.07%), Mark Hotel Land Loan (2.97%) and The Gentry Apartments (0.40%). Due to their stable performance, the loans maintain investment grade shadow ratings. Occupancy at 529 Fifth Avenue had risen to 100% by Dec. 31, 2007, after dropping temporarily during 2007. The Mark Hotel Land Loan is secured by a ground lease, and as such, income remained stable in line with the ground rent payment. Occupancy levels also remained stable at Deptford Mall and the Gentry Apartments.

In total, four loans (10.57% of the pool) are considered Fitch LOCs, including the second largest loan. The loan, Parkoff Portfolio (8.7%), is secured by a portfolio of multifamily buildings in New York City and had a servicer reported debt service coverage ratio (DSCR) of 0.8 times (x) at Dec. 31, 2007. The properties are currently undergoing a stabilization plan that entails converting rent stabilized units to market units. Thus far, income has fallen below Fitch's expectations due to slower progress in converting units as well as higher than expected expenses. However, the borrower has a self administered debt service reserve from owner's equity that would cover for more than seven years if necessary.

The second and third loans of concern (1.8%) are also secured by multifamily buildings located in New York City and share the same sponsor. The properties are currently undergoing a stabilization plan and conversion of the rent stabilized units to market is slightly behind schedule resulting in low Year End 2007(YE07) DSCRs of 0.36x and (0.15x), respectively. However, debt service reserves are in place. In addition, somewhat mitigating the poor performance is the presence of subordinate debt.

Fitch is closely monitoring its loans of concerns, which are reflected in the negative outlooks on the lower rated classes in the deal. However, affirmations are warranted at this time due to minimal near-term maturity risk as none of the loans mature prior to 2012.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.