Fitch Upgrades 1 Class of MSDW 2003-HQ2

NEW YORK--(BUSINESS WIRE)--

Fitch Ratings has upgraded one class of Morgan Stanley Dean Witter Capital I Inc., commercial mortgage pass-through certificates, series 2003-HQ2 (MSDW 2003-HQ2). A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrade is due to improved credit enhancement to the remaining Fitch rated class resulting from the pay-off of approximately 40 loans and $658 million in principal reduction since the previous rating action. The pool has experienced $6.8 million (0.7% of the original pool balance) in realized losses to date.

As of the May 2013 distribution date, the pool's aggregate principal balance has been reduced by 96.9% to $29.3 million from $931.6 million at issuance. There are seven remaining loans, none of which are currently defeased. Fitch has designated five of the seven loans (70.5% of the pool) as Fitch Loans of Concern, which includes four specially serviced assets (60% of the pool). Interest shortfalls are currently affecting classes M through O.

The largest contributor to expected losses is a specially-serviced loan (16.5% of the pool) secured by a 62,715 sf office property located in Arlington Heights, IL (Chicago MSA). Per the March 2013 rent roll the property is 51.4% occupied. A foreclosure complaint was filed in July 2012 and a receiver took control in October 2012. A foreclosure sale is anticipated for July 2013.

RATING SENSITIVITY

The rating of class H is expected to remain stable. Class H is expected to pay off in full, although, some of the pay down is likely to come from disposition proceeds on the specially serviced loans.

Fitch upgrades and assigns a Rating Outlook to the following class:

--$8.1 million class H to 'BBsf' from 'CCCsf'; Outlook Stable.

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

Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 18, 2012 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' (June 6, 2012);

--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 18, 2012).

Applicable Criteria and Related Research

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679923

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

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696969

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=791404

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