DBRS Confirms Ratings of Resource Capital Corp. CRE Notes 2013, Ltd.

DBRS, Inc. (DBRS) has today confirmed the rating on the Floating Rate Notes (the Notes) issued by Resource Capital Corp. CRE Notes 2013, Ltd. as follows:

-- 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 E at BB (sf)
-- Class F at B (sf)

All trends are Stable.

The rating confirmations reflect the continued stable performance of the pool since issuance in December 2013. The current pool consists of 12 loans secured by traditional commercial real estate assets, including multifamily, retail and office properties. According to the November 2015 remittance, there has been collateral reduction of 59.6% as a result of the repayment of 14 loans since issuance. The remaining loans benefit from low leverage on a per-unit basis, with the weighted-average debt yield based on the most recently reported net operating income and outstanding trust balance at 9.0%, which is relatively strong, given the pool consists of stabilizing assets.

The collateral loans are secured by stabilizing properties, which carry initial terms of two or three years and include built-in extension options of up to an additional one to three years. The borrowers are typically new equity sponsors of fairly well-positioned assets within their respective markets. Some loans also contain future funding facilities designed to aid in property stabilization. The releases of designated future funding dollars to individual borrowers are at the discretion of the servicer upon determination that all requirements for such future funding have been met. As of the November 2015 remittance, there is a total of $2.4 million remaining in future funding allocated across four loans, which currently represent 26.5% of the current pool balance based on the fully funded loan amounts.

Because the transaction consists of only 12 loans, the pool has become concentrated, as the largest loan, the largest three loans and the largest five loans account for 19.2%, 42.5% and 60.5% of the current pool balance, respectively, based on fully funded loan balances.

There is currently one loan in special servicing and six loans on the servicer’s watchlist, representing 4.8% and 53.6% of the fully funded pool balance, respectively. Five of these loans are being monitored for upcoming maturity; however, the borrowers for all but one of these loans (Peppertree Park Apartments) have exercised one-year extension options. The Peppertree Park loan is expected to pay in full by its January 2016 maturity date. The SunTrust portfolio loan, which is secured by 18 retail bank branches in seven southeastern states, was added to the watchlist for a deferred maintenance item that is not expected to materially affect the financial performance of the loan. The specially serviced loan is highlighted below.

The Southern Pines Apartments loan (Prospectus ID#25, 4.8% of the fully funded pool balance) is secured by a 24-building, 368-unit multifamily property in Spartanburg, South Carolina, originally built in 1976. The loan transferred to special servicing as a result of maturity default in November 2015, though it has three one-year extension options that the borrower may execute, with the first option not structured with an extension fee. At issuance, the loan was structured with an initial $700,000 capex reserve and $1.0 million in future funding to renovate the property. As of the November 2015 remittance, no future funding dollars have been released to the borrower. According to the September 2014 servicer site inspection, new roofing, siding and internet cable had been completed at all buildings, and vacant units were in the process of receiving new laminate flooring and bath fixtures. As of the June 2015 rent roll, the property was 67.3% occupied, with average rents of $543/unit. This is an improvement over the June 2014 figures of 44.6% and $508/unit, respectively, but similar to the respective figures of 66.6% and $527/unit at issuance. The property remains in the lease-up stage, and while the loan is in special serving, the as-is appraised value at issuance was $9.9 million, which equates to a current loan-to-value of 50.1%. Inclusive of all costs the borrower has spent on the acquisition and capital improvements at the property, the borrower has market equity of over $3.3 million. DBRS is currently awaiting an update from the servicer regarding a strategy for this loan.

The ratings assigned by DBRS contemplate timely payments of distributable interest and, in the case of the Offered Notes other than the Class A-S and Class B Notes, ultimate recovery of Deferred Collateralized Note Interest Amounts (inclusive of interest payable thereon at the applicable rate to the extent permitted by law). The transaction is a standard sequential pay waterfall.

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

The applicable methodologies are CMBS North American Surveillance (January 2015) and North American CMBS Rating Methodology (June 2015), which can be found on our website under Methodologies.

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

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