DBRS Confirms Ratings on Arbor Realty Commercial Real Estate Notes 2015-FL1, Ltd.

DBRS, Inc. (DBRS) has today confirmed the ratings on the following classes of secured floating-rate notes (the Notes) issued by Arbor Realty Commercial Real Estate Notes 2015-FL1, Ltd. (ARCLO 2015-FL1):

-- Class A at AAA (sf)
-- Class B at A (low) (sf)
-- Class C at BBB (low) (sf)

All trends are Stable. DBRS does not rate the first loss piece, the Preferred Shares held by the Issuer.

The rating confirmations reflect that the performance of the transaction remains in line with DBRS’s expectations at issuance. The pool currently consists of 29 interest-only floating-rate loans totaling $291.3 million secured by 28 multifamily properties and one office property. In February 2016, the pool consisted of 26 loans totaling $287.5 million secured by 26 commercial properties. The transaction features an initial 30-month replacement period whereby the Issuer can substitute collateral in the pool, subject to certain Eligibility Criteria, including Rating Agency Condition by DBRS. As of the January 2017 remittance, there remains $8.7 million in equity that the Issuer can fund by originating additional loans. The transaction pays sequentially after the replacement period ends.

As of the January 2017 remittance, only six of the original 17 loans, representing 35.8% of the current transaction balance, remain the pool as 23 additional loans have been added during the replacement period. All loans have a maximum initial term of three years followed by potential extension options.

The loans are secured predominantly by multifamily properties located primarily in urban and suburban markets, which benefit from greater liquidity or are affordable offerings in stable communities. Most of the properties are current cash-flowing assets in a period of transition with viable plans and loan structure to stabilize and improve the asset value. All of the loans are structured with cash management in place from origination and are structured with reserves, including several with an initial debt service reserve.

The Issuer, Servicer, Mortgage Loan Seller and Advancing Agent are related parties, a non-rated entity. In addition to recently issued transactions (one in 2013, one in 2014, two in 2015 and one in 2016) Arbor Realty SR, Inc. (Arbor) has a proven track record with several collateralized loan obligation platforms that performed well in 2004, 2005 and 2006. Arbor holds the 27% equity of the Preferred Shares in the transaction.

The rating assigned to Class B materially deviates from the higher rating implied by the Large Pool Multi-borrower Parameters. DBRS considers this difference to be a material deviation from the methodology and, in this case, the rating reflects that the structural features (loan or transaction) outweigh the quantitative output as the transaction is a rotating pool and, hence, the collateral changes over time.

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

The principal methodologies are North American CMBS Rating Methodology (January 2017) and CMBS North American Surveillance (December 2016), which can be found on dbrs.com under Methodologies.

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

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.