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Rating Action:

Moody's assigns provisional rating to one class of notes to be issued by BSPRT 2018-FL3

22 Mar 2018

New York, March 22, 2018 -- Moody's Investors Service ("Moody's") has assigned a provisional rating to one class of notes to be issued by BSPRT 2018-FL3 Issuer, Ltd. (the "Issuer" or "BSPRT 2018-FL3"):

Moody's rating action is as follows:

Cl. A, Assigned (P)Aaa (sf)

The Class A Notes are referred to herein as the "Rated Notes."

RATINGS RATIONALE

Moody's issues provisional ratings in advance of the final sale of financial instruments, but these ratings only represent Moody's preliminary credit opinions. Upon a conclusive review of a transaction and associated documentation, Moody's will endeavor to assign definitive ratings. A definitive rating (if any) may differ from a provisional rating.

Moody's provisional ratings of the Rated Notes address the expected loss posed to noteholders. The provisional ratings reflects the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets.

BSPRT 2018-FL3 is a managed cash flow commercial real estate CLO ("CRE CLO"). The transaction has a 120-day ramp period and has a reinvestment period ending in March 2020 after which the transaction will become static. At the closing date, the transaction is expected to have 85.6% of the assets fully identified and closed; and 14.4% are expected to be identified and closed by the transaction effective date. The closing pool is expected to be collateralized by a pool of 28 commercial real estate loans in the forms of whole loans, senior participation, and non-controlling pari passu participation interests on 32 properties. The total par amount at closing is expected to be $522,145,156, with a fully ramped collateral balance of $610,000,000. The initial portfolio consists of 96.6% floating rate obligations with a 4.3% weighted average spread (WAS). One asset (3.4% of the initial portfolio) is fixed rate. The transaction is subject to a series of tests and eligibility criteria during the ramp-up and reinvestment periods.

The transaction is expected to close on or about April 5, 2018.

The initial loan pool has a Moody's weighted average loan-to-value (LTV) ratio of 118.8%. 63.2% of the pool were acquisition financing loans and 36.8% were refinancing loans (including recapitalization). The top three property type exposures are multifamily at 37.2%, hospitality at 30.8% and office at 20.0%. The top five assets (36.7% of the initial loan pool) and their respective property type and Moody's LTV are as follows: 1) The Williamsburg Hotel -- Hospitality-- 125.1%; 2) The Harlem Apartment Portfolio -- Multifamily-- 132.0%; 3) 3 Gateway Center -- Office-- 109.8%; 4) The Establishment-- Multifamily-- 135.1%; and 5) Whizin Market Square -- Unanchored Retail-- 114.5%.

Benefit Street Partners, L.L.C (the "Manager") will act as the collateral manager of the CRE CLO. As of December 30, 2017, BSPRT manages a commercial mortgage debt portfolio of approximately $1.4 billion and had approximately $610 million of equity. This is their fourth Moody's rated CRE CLO transaction. They will provide servicing to the collateral interest during the life cycle of the transaction. BSPRT will direct the selection, acquisition and disposition of collateral on behalf of the Issuer during the transaction's two-year reinvestment period. Thereafter, unscheduled principal payments and sale proceeds of impaired assets will be used to pay down the notes per the transaction waterfall. Situs Asset Management LLC will act as servicer and Situs Holdings, LLC will act as special servicer. U.S. Bank National Association will act as trustee and backup advancing agent on the underlying collateral.

In addition to the Rated Notes, the Issuer issued six classes of subordinated notes.

The transaction incorporates a par coverage test which, if triggered, diverts interest and principal proceeds to pay down the notes in order of seniority.

Moody's has identified the following parameters as key indicators of the expected loss within CRE CLO transactions: i) weighted average rating factor (WARF), a primary measure of credit quality with credit assessments completed for all of the collateral, weighted average life (WAL), weighted average recovery rate (WARR), number of asset obligors; and pair-wise asset correlation. These parameters are typically modeled as actual parameters for static deals and as covenants for managed deals.

For modeling purposes, Moody's used the following base-case assumptions:

Par amount: $610,000,000

Number of obligors: 31

Weighted Average Rating Factor (WARF): 4512

Weighted Average Recovery Rate (WARR): 50.5%

Weighted Average Life (WAL): 5.5 years

Weighted Average Spread (WAS): 3.75%

Weighted Average Coupon (WAC): n/a

Pair-wise asset correlation: 35.0%

Methodology Underlying the Rating Action:

The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in June 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Factors That Would Lead to a Downgrade of the Rating:

The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The collateral manager's investment decisions and management of the transaction will also affect the performance of the Rated Notes.

Moody's Parameter Sensitivities: Changes in any one or combination of the key parameters may have rating implications on certain classes of Rated Notes. However, in many instances, a change in key parameter assumptions in certain stress scenarios may be offset by a change in one or more of the other key parameters. The Rated Notes is particularly sensitive to changes in rating factor assumptions of the underlying collateral. Holding all other key parameters static, stressing the portfolio WARF to 5004 (approx. 11% change) would result in no rating movement on the Rated Notes. Stressing the portfolio to 5455 (approx. 21% change) would result in no rating movement on the Rated Notes.

Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment. Commercial real estate property values are continuing to move in a positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction, moderate job growth and the decreased cost of debt and equity capital have aided this improvement.

Further details regarding Moody's analysis of this transaction may be found in a related pre-sale report, soon to be available on Moodys.com.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1114339.

The analysis relies on a Monte Carlo simulation that generates a large number of collateral loss or cash flow scenarios, which on average meet key metrics Moody's determines based on its assessment of the collateral characteristics. Moody's then evaluates each simulated scenario using model that replicates the relevant structural features and payment allocation rules of the transaction, to derive losses or payments for each rated instrument. The average loss a rated instrument incurs in all of the simulated collateral loss or cash flow scenarios, which Moody's weights based on its assumptions about the likelihood of events in such scenarios actually occurring, results in the expected loss of the rated instrument.

Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Scarlett Shao
Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Deryk Meherik
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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