DBRS Morningstar Confirms the Ratings of Arbor Realty Commercial Real Estate Notes 2019-FL2, Ltd.

DBRS Limited (DBRS Morningstar) confirmed the ratings on all classes of secured floating rate notes issued by Arbor Realty Commercial Real Estate Notes 2019-FL2, Ltd. as follows:

-- Class A Senior Secured Floating Rate Notes at AAA (sf)
-- Class A-S 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 (high) (sf)
-- Class E Secured Floating Rate Notes at BBB (low) (sf)
-- Class F Floating Rate Notes at BB (low) (sf)
-- Class G Floating Rate Notes at B (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance. As of October 2020, there are no loans in special servicing or on the servicer’s watchlist. According to the collateral manager, no borrowers have requested relief to date or have forewarned of future cash flow problems due to the ongoing Coronavirus Disease (COVID-19) pandemic. It was also noted that there have been no material issues or delays regarding borrowers’ abilities to complete individual business plans from issuance.

The transaction is a managed collateralized loan obligation pool with a maximum funded balance of $635.0 million. As of the October 2020 remittance, the pool consisted of 33 multifamily properties totalling $635.0 million. In contrast, at closing, the pool consisted of 27 loans totalling $510.9 million. The vast majority of loans are secured by properties in various stages of transition with reserves available to borrowers to aid in property stabilization. The transaction has a 36-month reinvestment period, which will expire in November 2022. Reinvestment is subject to Eligibility Criteria that includes a rating agency condition by DBRS Morningstar.

The pool is concentrated by properties located in suburban and tertiary markets as 30.2% of the current pool balance is located in Market Rank 5, 25.9% of the pool is located in Market Rank 2, and 24.5% of the pool is located in Market Rank 3. According to reporting provided by the servicer, loans that reported trailing 12 month financials throughout 2020 reported a weighted-average debt service coverage ratio of 1.28 times.

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.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#1 – American Heritage Portfolio (8.5% of the pool)
-- Prospectus ID#2 – Lakeside Village at Oakbrook (7.8% of the pool)
-- Prospectus ID#4 – The Solaris (5.7% of the pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is North American CMBS Surveillance Methodology (March 6, 2020), 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.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

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

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