DBRS Removes from Under Review with Negative Implications All Classes of RAIT 2017-FL8 Trust

DBRS Limited (DBRS) removed from Under Review with Negative Implications all classes of Floating Rate Notes issued by RAIT 2017-FL8 Trust (the Trust), where they were placed on March 12, 2018. DBRS also confirmed the ratings of all classes of the Trust as follows:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction. At issuance, the transaction consisted of 23 interest-only, floating-rate loans secured by 26 transitional commercial properties. As of the October 2018 remittance, 19 of the loans remain in the pool with an outstanding trust balance of approximately $223.0 million, representing a collateral reduction of 14.1% since issuance due to unscheduled loan repayment, as four loans have fully repaid from the Trust, while one loan has partially repaid. Two loans, representing 15.1% of the current trust balance, have unfunded future funding commitments totalling approximately $3.1 million, which are held outside the Trust as pari passu non-controlling participation interests.

The classes were previously placed Under Review with Negative Implications due to concerns over the servicing of all RAIT Financial Trust (RAIT or the Company; a non-rated entity) transactions, as RAIT, parent of the issuer, mortgage loan seller, servicer/special servicer, advancing agent and trust administrator, was experiencing financial troubles this past year. The uncertainty surrounding the direction of the Company and the concerns regarding RAIT’s capabilities as servicer to ensure the underlying loans were performing in line with their respective business plans were cited by DBRS. DBRS met with the servicing team and senior management on several occasions, and based on the meetings, the servicing and asset management teams in place appeared to be sufficient to service and specially service its commercial real estate collateralized loan obligation transactions. While there are outstanding future funding commitments for two loans, given the low dollar balance relative to the outstanding trust balance, DBRS does not foresee any material risk in RAIT’s ability to meet these obligations.

As of the October 2018 remittance, there are no loans in special servicing or on the servicer’s watchlist. The loans are all secured by traditional property types (multifamily, retail and office), most of which (94.1% of the current trust balance) are located in urban and suburban markets that benefit from greater liquidity and/or are affordable offerings in stable communities. Of the 19 loans, 18 loans (94.1% of the current trust balance) represent acquisition financing, with the borrowers contributing equity to the transaction. Most of the properties are currently cash-flowing assets in a period of transition with viable plans and loan structures in place to facilitate stabilization and value growth. Based on updated reporting provided by RAIT in its capacity as servicer, DBRS confirmed that the majority of the remaining loan sponsors are in the process of successfully executing their respective business plans. In addition, all borrowers have purchased LIBOR rate caps to protect against a rise in interest rates over the term of their respective loans. The Class E, F, G and H notes (19.8% of the current trust balance) are retained by RAIT.

All ratings will be subject to ongoing surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

As part of this review, DBRS has provided updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Winding Trails Apartments (Prospectus ID#1 – 9.8% of the current trust balance)
-- Kearny-Clay Portfolio (Prospectus ID#7 – 6.8% of the current trust balance)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for the entire commercial mortgage-backed securities universe, as well as deal and loan-level commentary for all DBRS-rated transactions.

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

The principal methodology is North American CMBS Surveillance Methodology, which can be found on dbrs.com under Methodologies. For a list of the Structured Finance related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document on www.dbrs.com. Please note that not every related methodology listed under a principal Structured Finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrs.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

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