DBRS Confirms Ratings of Arbor Realty Commercial Real Estate Notes 2017-FL3, Ltd.

DBRS Limited (DBRS) confirmed the ratings of the Floating Rate Notes issued by Arbor Realty Commercial Real Estate Notes 2017-FL3, Ltd. (the Issuer) as follows:

-- Class A Senior Secured Floating Rate Notes at AAA (sf)
-- Class B Secured Floating Rate Notes at AA (low) (sf)
-- Class C Secured Floating Rate Notes at A (low) (sf)
-- Class D Secured Floating Rate Notes at BBB (low) (sf)
-- Class E Floating Rate Notes at BB (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which remains in line with DBRS’s expectations at issuance. The pool currently consists of 29 floating-rate loans totalling $474.3 million, secured by multifamily and commercial properties. At issuance in December 2017, the pool consisted of 16 loans totalling $368.3 million. The transaction is structured with an initial 36-month replacement period whereby the Issuer can substitute collateral in the pool, subject to certain Eligibility Criteria, including the rating agency condition by DBRS. As of the November 2018 remittance, there remains $5.7 million in equity that the Issuer can deploy to originate additional loans. The transaction pays sequentially after the replacement period ends.

As of the November 2018 remittance, 15 of the original 16 loans, representing 72.4% of the current transaction balance, remain in the pool. There have been 14 replacement loans added since issuance. Most loans have a maximum initial term of two or three years, with extension options generally available, subject to criteria.

The loans are predominantly secured by multifamily properties, most of which are located in urban and suburban markets that benefit from greater liquidity and/or are affordable offerings in stable communities. 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. All of the loans are structured with cash management in place at origination and are also structured with reserves, including several loans that were structured with an initial operating and renovation reserve.

The Issuer, Servicer, Mortgage Loan Seller and Advancing Agent are related parties. In addition to recently issued transactions (one in 2013, one in 2014, two in 2015, one in 2016, three in 2017 and one in 2018), 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 unrated 19.1% equity piece as Preferred Shares in the transaction.

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:

• Prospectus ID#1 – Preston Hollow (10.4% of the pool balance)
• Prospectus ID#2 – The Darlington (9.2% of the pool 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 CMBS 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 & Criteria. 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.