DBRS Finalizes Ratings of ACRE Commercial Mortgage Trust 2013-FL1

DBRS has today finalized the provisional ratings of the following Commercial Mortgage Pass-Through Certificates, Series 2013-FL1 (the Notes) issued by ACRE Commercial Mortgage Trust 2013-FL1. The trends are Stable.

-- Class A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class X at AAA (sf)
-- Class E at BB (low) (sf)
-- Class F at B (low) (sf)

Classes X, E and F are non-offered classes.

The Class X balance is notional. DBRS ratings on interest-only certificates address the likelihood of receiving interest based on the notional amount outstanding. DBRS considers the interest-only certificate's position within the transaction payment waterfall when determining the appropriate rating. Although interest due in a given period may be reduced by additional interest accrual amounts owed to the Class D, E, F and G certificates when the pass-through rate on those certificates is constrained by the Net WAC Rate, the amount owed to Class X is defined as being net of these additional interest accrual amounts.

The collateral for the transaction consists of a static pool of 18 participation interests in floating-rate mortgages with a $493.8 million current balance, secured by 27 transitional commercial and multifamily properties. Each loan has a companion participation held by a subsidiary of the trust asset seller and sponsor, ACRC Lender LLC. The current balance of the companion participations is $0, as these participations represent future funding commitments. Currently, future funding commitments total $42.7 million and range from $88,788 to $7,000,000 per loan. The future funding is generally to be used for renovations of the properties, leasing costs and to pay interest during the renovation process. Future funding will be the obligation of the holder of the companion participation, and the trust has been indemnified by ACRC Lender LLC against any liability resulting from failure to advance funds as required under the loan documents. ACRC Lender LLC is the primary lending entity of Ares Commercial Real Estate Corporation (ACRE), a publicly-traded specialty finance company, and the majority of ACRE’s assets are held within ACRC Lender LLC. Each property has a business plan to execute that is expected to increase net cash flow. It is DBRS’s opinion that the business plans were generally achievable given market conditions, recent property performance and adequate available future funding for planned renovations and leasing costs. DBRS modeled loan-level probability of default based on in-place cash flow at each respective property, while loss severity was based on DBRS stabilized cash flow. For modeling purposes, DBRS assumed that the maximum loan commitment was outstanding, as opposed to the current loan balance. All references to percentages of pool in the rating report are based on the trust balance of $493.8 million, unless stated otherwise.

The ratings assigned to the Notes by DBRS are based exclusively on the support provided by the transaction structure and the credit underlying trust assets. All classes will be subject to ongoing surveillance, which could result in upgrades or downgrades by DBRS after the date of issuance.

For more information, please refer to the DBRS rating report on the DBRS web site.

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

The applicable methodologies are CMBS Rating Methodology and Unified Interest Rate Model for U.S. RMBS Transactions, which can be found on our website under Methodologies.

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

The Rule 17g-7 Report of Representations and Warranties is hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.