DBRS Confirms Ratings on Arbor Realty Commercial Real Estate Notes 2015-FL2, Ltd.

DBRS, Inc. (DBRS) confirmed the ratings on the following classes of secured floating-rate notes (the Notes) issued by Arbor Realty Commercial Real Estate Notes 2015-FL2, Ltd. (ARCLO 2015-FL1):

-- Class A at AAA (sf)
-- Class B at AA (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 the current performance of the transaction. The pool currently consists of 26 floating-rate loans totaling $296.2 million secured by 26 multifamily properties. At issuance in August 2015, the pool consisted of 17 loans totaling $302.6 million secured by 17 commercial properties. The transaction features an initial 36-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 August 2017 remittance, there remains $53.8 million in equity that the Issuer can fund by originating additional loans. After the remaining 12 months of the replacement period, the transaction pays sequentially.

As of the August 2017 remittance, only six of the original 17 loans remain, representing 37.1% of the current funded pool balance. To date, 21 loans, representing 62.9% of the current funded pool balance, have been added to the transaction during the replacement period.

The loans are secured predominantly by multifamily properties located primarily in core (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 with reserves, including several with an initial debt service reserve. Based on the DBRS cash flow analysis, the current pool composition has a weighted-average stabilized debt yield of 7.2%, which, although low, is reflective of collateral located in urban markets, including New York City and Los Angeles.

The Issuer, Servicer, Mortgage Loan Seller and Advancing Agent are related parties and a non-rated entity. In addition to recently issued transactions (one in 2013, one in 2014, two in 2015, one in 2016 and two in 2017), 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 initially holds the 23.5% equity of the Preferred Shares in the transaction.

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

The principal methodology is CMBS North American Surveillance, which can be found on dbrs.com under Methodologies.

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