OREANDA-NEWS. Fitch Ratings has upgraded four classes and affirmed 22 classes of Morgan Stanley Capital I Trust (MSCI) commercial mortgage pass-through certificates series 2007-HQ12. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrades and affirmations reflect an increase in credit enhancement sufficient to offset Fitch modeled losses across the pool. Fitch modeled losses of 16.6% of the remaining pool; expected losses on the original pool balance total 12%, including losses already incurred. The modeled loss amount is slightly lower than Fitch's previous rating action in February 2014 as higher recoveries were received on disposed loans than previously modeled. The previously second-largest loan in the pool, the \$170 million Parkoff Portfolio loan, paid off in January 2015.

As of the February 2015 distribution date, the pool's aggregate principal balance has been reduced by 44.6% to \$1.08 billion from \$1.96 billion at issuance. One loan is defeased (0.1% of the pool). The pool has experienced \$56.2 million (2.9% of the original pool balance) in realized losses to date. Interest shortfalls totaling \$34.4 million are currently affecting classes B through S. Fitch has designated 32 loans (59.3%) as Fitch Loans of Concern, which includes eight specially serviced assets (6.3%) and previously modified loans.

The largest contributors to modeled losses remain similar to Fitch's prior rating actions: Columbia Center (35.1% of the pool balance); Beacon Seattle & DC Portfolio (6.7%); and Timberland Buildings (3.1%).

The Columbia Center loan is secured by a 1.5 million square foot (sf), 76-story office building located in the Seattle downtown CBD. The property has experienced significant declines in occupancy since issuance, including (when Amazon vacated at lease expiration in February 2011). The loan was previously modified; as part of the modification the loan was split into a \$300 million A-note and \$80 million B-note and its maturity extended to May 2015 with two 1-year extension options. The reported occupancy as of Sept. 2014 has improved to 78.4%. According to the REIS Seattle office report as of fourth-quarter 2014, the subject property occupancy remains below market with the CBD vacancy around 12.4%.

The Beacon Seattle & DC Portfolio was initially secured by a portfolio consisting of 16 office properties, the pledge of the mortgage and the borrower's ownership interest in one office property, and the pledge of cash flows from three office properties. In aggregate, the initial portfolio of 20 properties comprised approximately 9.8 million sf of office space. The loan was transferred to special servicing in April 2010 for imminent default and was modified in December 2010.

Key modification terms included a five-year extension of the loan to May 2017, a deleveraging structure that provided for the release of properties over time, and an interest rate reduction. The loan was returned to the master servicer in May 2012 and is performing under the modified terms. Nine properties remain. As of Sept. 2014, the portfolio occupancy of the remaining nine properties was approximately 79%, down significantly from the 97% occupancy reported at issuance for the same properties. The portfolio continues to be subject to tenant lease rollover risk.

The largest specially serviced asset is the real-estate owned (REO) Timberland Buildings, which is secured by an approximately 354,300 sf office property located in Troy, MI. The loan transferred to special servicing in September 2012 for imminent default. The most recent reported occupancy was 45% as of Dec. 2014.

RATING SENSITIVITIES

The Rating Outlooks on the super senior classes remains Stable. The rating Outlooks on classes A-M and A-MFL have been revised to Positive; although credit enhancement continues to improve, upgrades were limited until further progress has been made on refinance prospects and/or paydown of the two largest loans. The distressed classes may be subject to further downgrades if losses to defaulted loans are higher than expected.

Fitch upgrades the following two classes:

--\$170.9 million class A-M to 'BBBsf' from 'BBsf'; Outlook to Positive from Stable;
--\$25 million class A-MFL to 'BBBsf' from 'BBsf'; Outlook to Positive Stable;
--\$53 million class A-J to 'Bsf' from 'CCCsf'; Assign Outlook Stable;
--\$91.4 million class A-JFL to 'Bsf' from 'CCCsf'; Assign Outlook Stable.

Fitch affirms the following classes:

--\$158.2 million class A-1A at 'AAAsf'; Outlook Stable;
--\$48.1 million class A-2 at 'AAAsf'; Outlook Stable;
--\$9.7 million class A-2FL at 'AAAsf'; Outlook Stable;
--\$56 million class A-2FX at 'AAAsf'; Outlook Stable;
--\$131.5 million class A-3 at 'AAAsf'; Outlook Stable;
--\$66.4 million class A-4 at 'AAAsf'; Outlook Stable;
--\$83 million class A-5 at 'AAAsf'; Outlook Stable;
--\$41.6 million class B at 'CCCsf'; RE 30%;
--\$22 million class C at 'CCCsf'; RE 0%;
--\$24.5 million class D at 'CCsf'; RE 0%;
--\$14.7 million class E at 'CCsf'; RE 0%;
--\$24.5 million class F at 'CCsf'; RE 0%;
--\$22 million class G at 'CCsf'; RE 0%;
--\$22 million class H at 'Csf'; RE 0%;
--\$14.7 million class J at 'Csf'; RE 0%;
--\$4.9 million class K at 'Csf'; RE 0%.

The \$135,392 class L and classes M, N, O, P and Q are affirmed at 'Dsf', RE 0% due to realized losses.

The class A-1 certificates have paid in full. Fitch does not rate the class S certificates. Fitch previously withdrew the rating on the interest-only class X certificates.