OREANDA-NEWS. Fitch Ratings has affirmed nine classes of GAHR Commercial Mortgage Trust

2015-NRF certificates (GAHR 2015-NRF). A full list of rating actions follows at the end of this ratings action commentary.

KEY RATING DRIVERS

The affirmations reflect improving credit enhancement from property releases and the continued overall stable performance of the underlying pool. No upgrades were taken as Fitch is concerned about the redistribution of the portfolio towards less stable property types and potential volatility within the healthcare sector.

The transaction is currently secured by interests in 179 medical office and healthcare related properties. Since issuance, 36 properties were released from the pool. The collateral currently consists of 107 medical office buildings (MOBs); 58 healthcare properties NNN leased to third party operators as skilled nursing facilities (SNFs), long-term acute care hospitals (LTACHs), and senior housing; and 14 healthcare properties subject to operating leases that are tied directly to free cash from the underlying property operations (RIDEA Properties ). The MOBs had an average occupancy of 89%, as of September 2016. All NNN leased properties remain 100% leased. The portfolio exhibits significant geographic diversity with assets located in 28 states and no individual state representing more than 10.2% of the allocated loan amount.

Released Properties; Improved Credit Enhancement: There has been significant pay down to the senior floating rate classes from a total of 36 releases since issuance, including 35 MOBs released in January 2017 at 115% release premium. The other release, which involved a SNF, was anticipated at issuance and permitted to be released at par, thereafter. The transaction is now over collateralized by $62.6 million.

Release Structure: Individual property releases are permitted subject to, among other things, 115% paydown of the allocated loan amount. However, there are no provisions to ensure the property type distribution at issuance is maintained. Therefore, disproportionate MOB property releases result in the redistribution of the remaining portfolio toward a larger weighting of collateral with material operating risk. Fitch's debt sizing hurdles have been adjusted higher to reflect the migration to more volatile property types.

Portfolio Redistribution: The collateral is diversified among multiple assets types; however, due to the releases, which were primarily MOBs, the portfolio's weighting by asset type has changed. Fitch analyzed the most recently available cash flows provided by the servicer (generally YE 2015 or YTD Sept. 2016). The current Fitch NCF attributed to the more traditionally stable medical office property type has decreased to 32.1% from 49.5% at issuance, while Fitch NCF attributed to more volatile asset types has improved with NNN healthcare properties (SNFs, LTACH, and Senior Housing) now at 47.8% compared to 35.7% at issuance; and RIDEA properties at 20% compared to 14.8% at issuance.

Operational Aspects of RIDEA Properties: 20% (by NCF) of the portfolio is secured by RIDEA properties whose cash flows are directly tied to the operations of independent living and assisted living facilities. These RIDEA properties are considered to have a greater risk of cash flow volatility due to the operational nature of the underlying assets. Further, the medical nature of the business the RIDEA Properties operates within poses a higher risk of liability claims given the large number of elderly residents and large number of employees. Additionally, changes to the Affordable Care Act could adversely affect these properties.

Leverage Metrics; Additional Debt: The $1.3 billion mortgage loan has a Fitch Ratings DSCR and LTV of 0.94x and 101.1%, respectively.

In addition to the trust debt there is a $284.7 million senior mezzanine loan, a $722,131 senior junior mezzanine loan, and a $306.9 million junior mezzanine loan. All mezzanine loans are fully subordinate to the mortgage loan and are subject to subordination and standstill agreements as well as an intercreditor agreement. The all in Fitch Ratings DSCR and LTV are 0.65x and 146.7%

Experienced Sponsorship: The loan is sponsored by NorthStar Realty Finance Corp. The affiliated NorthStar Healthcare Income Inc. (NHI) is a public, non-traded REIT that was formed to originate and acquire assets in healthcare real estate. Based on the portfolio's acquisition price, the sponsors had approximately $1.3 billion of equity in the transaction at issuance.

RATING SENSITIVITIES

Rating Outlooks for all classes remain Stable as a result of the improved credit enhancement to the pool and overall stable performance of the underlying assets. Future upgrades may be limited due to concerns that the current pattern of releases, which involved only the more traditionally stable medical office properties, will continue. Further, Fitch expects to see a period of sustained improved performance prior to any upgrades. Downgrades to the classes are possible should an asset level or economic event cause a decline in pool performance.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10

No third-party due diligence was provided or reviewed in relation to this rating action.

Fitch affirms the following ratings:

--$81.4 million A-FL1 at 'AAAsf'; Outlook Stable;

--$27.5 million class A-FL2 at 'AAAsf'; Outlook Stable;

--$119 million class A-FX at 'AAAsf'; Outlook Stable;

--$321.5 class X-FX* at 'AAsf'; Outlook Stable;

--$202.4 million class B-FX at 'AAsf'; Outlook Stable;

--$151.2 million class C-FX at 'Asf'; Outlook Stable;

--$192.2 million class D-FX at 'BBB-sf'; Outlook Stable;

--$215.5 million class E-FX at 'BB-sf'; Outlook Stable;

--$180 million class F-FX at 'B-sf'; Outlook Stable.

*Interest only class.

Fitch does not rate classes X-EXT and G-FX.