DBRS Morningstar Places All Classes of Ready Capital Mortgage Financing 2019-FL3 Under Review with Developing Implications

DBRS Limited (DBRS Morningstar) placed the following classes of Commercial Mortgage-Backed Notes, Series 2019-FL3 issued by Ready Capital Mortgage Financing 2019-FL3 Under Review with Developing Implications:

-- Class A at AAA (sf), Under Review with Developing Implications
-- Class A-S at AAA (sf), Under Review with Developing Implications
-- Class B at AA (low) (sf), Under Review with Developing Implications
-- Class C at A (low) (sf), Under Review with Developing Implications
-- Class D at BBB (low) (sf), Under Review with Developing Implications
-- Class E at BB (low) (sf), Under Review with Developing Implications
-- Class F at B (low) (sf), Under Review with Developing Implications

There are no trends for this rating action.

DBRS Morningstar has taken these latest rating actions because it has not received supporting information regarding updates to the collateral and the associated business plans. Because of the transitional nature of the underlying collateral, DBRS Morningstar requires more information to support near-term rating actions and is continuing to work with the servicer to obtain updated loan-level information.

At issuance, the collateral consisted of 43 floating-rate mortgages secured by 44 transitional properties totaling approximately $320.8 million, excluding approximately $101.3 million of future funding commitments. As of the March 2020 remittance, 37 loans remain in the pool with approximately $50.7 million of future funding committed to the trust to date.

As of the March 2020 remittance, there are 11 loans, representing 23.3% of the current pool, that are on the servicer’s watchlist and one loan, representing 1.3% of the pool, in special servicing. That loan, Arbor Grove (Prospectus ID#25), is secured by a multifamily property in Canton, Ohio, and transferred to special servicing in February 2020 after the loan failed to secure refinancing. The borrower’s business plan called for increases to occupancy after which the loan would be refinanced into a Freddie Mac loan for permanent financing. The sponsor has experience with this type of financing, having successfully refinanced six previous Ready Capital loans through Freddie Mac.

DBRS Morningstar remains concerned with loans secured by hotel properties given the Coronavirus Disease (COVID-19) outbreak and its impact on tourism and travel. The Tapestry by Hilton Daytona Beach loan (Prospectus ID#22, 1.7% of the pool) is the only loan in the pool secured by a lodging property.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

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

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 dbrsmorningstar.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 Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. 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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

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 [email protected].

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

These ratings are Under Review with Developing Implications. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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