DBRS Downgrades Eight Classes and Confirms 15 Classes of Morgan Stanley Capital I Trust 2005-HQ6

DBRS has today downgraded eight classes of the Morgan Stanley Capital I Trust 2005-HQ6 as follows:

-- Class F from B (sf) to B (low) (sf)
-- Class G from B (low) (sf) to CCC (sf)
-- Class J from CCC (sf) to C (sf)
-- Class K from C (sf) to D (sf)
-- Class L from C (sf) to D (sf)
-- Class M from C (sf) to D (sf)
-- Class N from C (sf) to D (sf)
-- Class O from C (sf) to D (sf)

The following 15 classes have been confirmed as follows, all with Stable trends:

-- Class A-1A at AAA (sf)
-- Class A-2A at AAA (sf)
-- Class A-2B at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-4A at AAA (sf)
-- Class A-4B at AAA (sf)
-- Class A-J at A (low) (sf)
-- Class B at BBB (sf)
-- Class C at BBB (low) (sf)
-- Class D at BB (high) (sf)
-- Class E at BB (sf)
-- Class H at CCC (sf)
-- Class X-1 at AAA (sf)
-- Class X-2 at AAA (sf)

In addition, DBRS has removed the Interest in Arrears designation from Classes J, K, L, M, N and O.

These rating actions reflect the recent liquidation of the largest loan in special servicing, Prospectus ID #13, Oviedo Mall, and the current outlook for the 11 delinquent and/or specially-serviced loans representing 4.8% of the pool and the 57 loans representing 26.3% of the pool on the servicer’s watchlist as of the April 2013 remittance report.

There were 138 of the original 172 loans remaining in the pool as of the April 2013 remittance report, with collateral reduction of 24.2% since issuance. The weighted-average pool debt service coverage ratio (DSCR) was 1.30 times (x), as compared with 1.40x at issuance, with a weighted-average debt yield of 9.0%, as compared with 9.3% at issuance. There are nine defeased loans in the pool, representing 3.7% of the transaction balance. The Top 15 loans are healthy performers overall, with a weighted-average DSCR of 1.28x and a weighted-average debt yield of 8.6% for the 14 loans not in special servicing, as calculated on the whole loan balance and the YE2011 NCF figures for each loan.

The liquidation of Prospectus ID #13, Oviedo Mall, was completed in April 2013 at a loss of $52.44 million to the trust, representing a loss severity of 108% as of the April 2013 remittance report, with the property’s sale price reported by the special servicer of $7.69 million (approximately $18 per square foot (psf) on the collateral portion of the mall), with gross expenses and shortfalls applied to the trust of $10.8 million as of the April 2013 remittance report. The bulk of the expenses were attributed to the cumulative ASER balance outstanding on the loan, the servicer’s advances and interest on those advances. In addition, interest that accrued on the loan from the date the asset was deemed non-recoverable to the date of disposal was due upon liquidation, which amounted to $1.43 million, according to the special servicer. The loss eliminated the remaining balance of Class P, the full balance of Classes O, N, M and L and part of Class K with the April 2013 remittance.

The loan was secured by a regional mall in Oviedo, Florida, approximately 15 miles northeast of Orlando. The loan was transferred to the special servicer in 2010 following the bankruptcy filing of the borrower’s parent company, General Growth Properties, Inc. (GGP). The asset had been real estate owned (REO) since November 2010 and was most recently appraised at $11.0 million in August 2012, down from $92.1 million at issuance. The asset suffered from in-line occupancy declines attributed to competition from other malls in the vicinity with superior anchor tenancy and in-line tenant mixes. The special servicer reports that the property type is difficult to liquidate given the limited pool of prospective buyers and the related challenges in gauging the true market value of the assets.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction, including details on the largest loans in the pool, the loans in special servicing and the loans on the servicer’s watchlist. The April 2013 Monthly Surveillance Report for this transaction will be published shortly. If you are interested in receiving this report, contact us at info@dbrs.com.

Notes:
All figures are in U.S. dollars unless otherwise noted.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodologies are CMBS Rating Methodology and CMBS North American Surveillance Methodology, which can be found on our website under Methodologies.