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

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

-- Class E to A (sf) from BB (sf)
-- Class F to A (sf) from B (sf)

All trends are Stable.

The rating upgrades reflect the increased credit support to the bonds as a result of successful loan repayments and the continued stable performance of the remaining loans in the transaction. The current pool consists of three loans secured by multifamily and retail properties. According to the November 2016 remittance, there has been collateral reduction of 91.3% as a result of the repayment of 23 loans since issuance. The remaining loans have stabilized and benefit from low leverage on a per-unit basis, with the weighted-average debt yield based on Q3 2016 reporting at 10.5%. The remaining loans have scheduled maturity dates in January 2017 and February 2017; however, each borrower has remaining extension options which, if exercised, would extend any given loan by an additional year. The largest loan is highlighted below.

The Forest Apartments loan (49.3% of the current pool balance) is secured by a 272-unit multifamily property in Durham, North Carolina, built in 1982. At issuance, the loan was structured with a $2.1 million future funding reserve available to the borrower to upsize the loan in order to fund interior and exterior renovations across the property. As of the November 2016 remittance, $550,000 of future funding for the loan remains. According to the September 2016 rent roll, the property has stabilized as the occupancy rate and average rental rate were reported at 97.1% and $782 per unit, respectively. Both figures are up over the September 2015 figures of 89.0% and $762 per unit, respectively. The improvements in occupancy and rental rates, combined with the end of ongoing capex projects, resulted in year-over-year cash flow growth of 30.2% and a trailing 12-month ending Q3 2016 debt yield of 9.2%, based on the outstanding loan balance. The loan is scheduled to mature in January 2017 and is expected to refinance from the trust at maturity.

The ratings assigned to Classes E and F materially deviate from the higher ratings implied by the quantitative model. DBRS considers a material deviation to be a rating differential of three or more notches between the assigned rating and the rating implied by the quantitative model that is a substantial component of a rating methodology; in this case, the assigned ratings reflect that the structural features (loan or transaction) and/or provisions in other relevant methodologies outweigh the quantitative model output.

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

The applicable methodologies are North American CMBS Rating Methodology (March 2016) and CMBS North American Surveillance (October 2016), 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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