DBRS Assigns Provisional Ratings to RAIT 2015-FL4 Trust

DBRS, Inc. (DBRS) has today assigned provisional ratings to the following classes of secured floating-rate notes (the Notes) to be issued by RAIT 2015-FL4 Trust. All trends are Stable.

-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class X-1 at BB (sf)
-- Class X-2 at BB (sf)
-- Class E at BB (sf)
-- Class F at B (sf)

Classes E and F have been privately placed.

The collateral for the transaction consists of newly originated floating-rate mortgages (20 loans, $219.3 million) secured by 25 transitional commercial real estate properties (the Initial Loans) and one additional mortgage, with a total of $3.75 million to be contributed in the 90 days post-closing (the Delayed Closing Mortgage loans) which, combined, total $223.0 million and 21 loans. The loans are secured by current cash flowing assets, most of which are in a period of transition with plans to stabilize and improve the asset value. The floating-rate mortgages were analyzed to determine the probability of loan default over the term of the loan and its refinance risk at maturity based on a fully extended loan term. Because of the floating-rate nature of the loans, the index (one-month LIBOR) was modeled at the lower of a DBRS stressed index that corresponded to the remaining fully extended term of the loans and the strike price of the interest rate cap, with the respective contractual loan spread added to determine a stressed interest rate over the loan term. When the cut-off balances were measured against the DBRS in-place net cash flow (NCF) and their respective stressed constants, there were 16 loans, representing 67.5% of the pool, with term debt service coverage ratios (DSCRs) below 1.15 times (x), a threshold indicative of a higher likelihood of term default. Additionally, to assess refinance risk, DBRS applied its refinance constants to the balloon amounts, resulting in 13 loans or 63.4% of the loans having refinance DSCRs below 1.00x relative to the DBRS Stabilized NCF. The properties are often transitioning with potential upside in the cash flow; however, DBRS does not give full credit to the stabilization if there are no holdbacks or other loan structural features in place were insufficient to support such treatment.

The transaction is a sequential-pay structure.

The DBRS rating addresses the likelihood of timely receipt of interest with contemplation of deferral as allowed for in the transaction documents and the ultimate payment of principal and interest (including any previously deferred) by the DBRS Rated Final Payment Date, defined as December 2031. The ratings assigned to the Notes by DBRS are based exclusively on the credit provided by the transaction structure and underlying trust assets. The Notes will be subject to ongoing surveillance, which could result in upgrades or downgrades by DBRS after the date of issuance.

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

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 Other Research or by contacting us at info@dbrs.com.

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

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