Fitch Upgrades 1 Class of MSCI 1998-HF2

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has upgraded one class and affirmed three classes of Morgan Stanley Capital I Trust's commercial mortgage pass-through certificates series 1998-HF2. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrade reflects increased credit enhancement from paydown, an increase in defeasance, and the liquidation of a previous specially serviced loan. Fitch modeled losses of 3.4% of the remaining pool, including $28.3 million (2.7% of the original pool balance) in realized losses to date.

As of the March 2015 distribution date, the pool's aggregate principal balance has been reduced by 97% to $31.7 million from $1.06 billion at issuance. Per the servicer reporting, four loans (31.9% of the pool) are defeased. Interest shortfalls are currently affecting classes L through N.

The largest loan in the pool is a retail center in Pleasant Hill, CA. The property has been 100% occupied for the last several years and is anchored by Staples (lease expiration Oct. 2016) and Rite Aid (lease expiration Nov. 2016). The year-end (YE) 2014 debt service coverage ratio (DSCR) has increased to 1.88x as of YE 2014 compared to 1.67x as of YE 2013. The loan is scheduled to mature in 2018.

Out of the remaining 15 loans eight non-defeased loans (52.1% of the pool) are represented by retail properties. A portion of the retail exposure consists of five single-tenant drug store assets (8.7% of the pool) including one Walgreens and four CVS stores, all located in secondary or tertiary markets. The second largest loan (13.7% of the pool) was included in the single-tenant retail total as of last review; however, since then the loan has defeased.

RATING SENSITIVITIES

Classes J and K are expected to remain stable due to high credit enhancement and continued expected paydown. In addition, class L, which has previously taken losses, should be sufficient to absorb upcoming expected losses. Downgrades are not expected on classes J and K, as the performance of the remaining pool has been stable with no loans in special servicing. Upgrades are not expected to class K as the pool has become concentrated.

Fitch upgrades the following class as indicated:

--$10.6 million class K to 'BBBsf' from 'BBsf'; Outlook Stable;

Fitch affirms the following classes as indicated:

--$12.4 million class J at 'AAAsf', Outlook Stable;

--$8.7 million class L at 'Dsf', RE 90%;

--$0 class M at 'Dsf', RE 0%.

The class A-1, A-2, B, C, D, E, F, G and H certificates have paid in full. Fitch does not rate the class N certificates. Fitch previously withdrew the rating on the interest-only class X certificates.

Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 10, 2014 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' (March 31, 2014);

--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 10, 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864268

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=982459

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.

Fitch Ratings
Primary Analyst
Martin Nunnally, +1-212-908-0871
Associate Director
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Committee Chairperson
Mary MacNeill, +1-212-908-0785
Managing Director
or
Media Relations, New York
Sandro Scenga, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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