DBRS Morningstar Assigns MOR CS2 Commercial Mortgage Special Servicer Ranking to Aegon USA Realty Advisors

DBRS, Inc. (DBRS Morningstar) assigned an MOR CS2 commercial mortgage special servicer ranking to Aegon USA Realty Advisors (Aegon RA or the Company). The trend for the ranking is Stable. Before completing its consolidation with DBRS, Inc. last year, Morningstar Credit Ratings, LLC maintained an MOR CS2 commercial mortgage special servicer ranking on the Company. Aegon RA is part of Aegon Asset Management, the investment-management brand of Aegon Group, and is an indirect wholly owned subsidiary of Aegon N.V., which is based in The Hague, Netherlands.

DBRS Morningstar assigned the ranking based on the following factors:

-- Aegon RA’s operational stability based on its tenured leadership, overall low employee turnover, and solid professional depth. Through existing staff and some redeployments, the Company soundly addressed a modest uptick in its special servicing activity over the past year arising from the Coronavirus Disease (COVID-19) pandemic. An in-house legal department further supports special servicing loan and real estate owned (REO) asset management, which Aegon RA handles through specialized teams.

-- The Company’s successful asset resolutions for its own account and affiliates. It also has a lengthy track record managing large-scale investment real estate and has served as an REO asset-resolution contractor for Fannie Mae since September 2016. Although Aegon RA has been a named special servicer for many commercial mortgage-backed securities (CMBS) transactions, and despite the pandemic, its active management, resolution activity, and master servicer interaction with CMBS assets has remained low.

-- An effective technology platform, which centers on a proprietary asset-management application integrated with third-party loan-servicing and real estate-accounting software. The application tracks assets through their lifecycles and can produce the latest version of the Commercial Real Estate Finance Council’s investor reporting package for CMBS transactions.

-- A sound audit function that has encompassed Regulation AB attestations, annual Service Organization Control 1 Type II reports, and periodic examinations from Aegon Asset Management’s internal audit department. Additionally, an operational risk management team conducts annual compliance reviews. Aegon RA undergoes annual Fannie Mae-commissioned audits, which reportedly have been clear of any material findings.

As of June 30, 2020, Aegon RA was named as the special servicer on 72 CMBS transactions and four collateralized debt obligation transactions, collectively containing 926 properties with an aggregate unpaid principal balance (UPB) of $37.0 billion.

As of June 30, 2020, the active special servicing portfolio contained 19 loans (13 classified as nonperforming) and 13 REO properties with a combined UPB or book balance of $1.2 billion. The portfolio included six CMBS loans (collateralized by 31 properties) with a UPB of $908.3 million and 10 Fannie Mae REO properties with a book balance of $78.6 million. In H1 2020, Aegon RA completed two Fannie Mae REO property sales that yielded aggregate proceeds well above Aegon RA’s estimated collateral values.

Aegon RA recently decided to pull back from CMBS special servicing to focus on its own, affiliated, and other client accounts. The Stable trend for the ranking reflects DBRS Morningstar’s view that the Company will continue to serve as an effective third-party asset manager and special servicer. The Company also maintains the requisite infrastructure and capabilities for securitized transactions should it selectively pursue such assignments.

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

DBRS Morningstar North American commercial mortgage servicer rankings are not credit ratings. Instead, they are designed to evaluate the quality of the parties that service commercial mortgage loans. Although the servicer’s financial condition contributes to the applicable ranking, its relative importance is such that a servicer’s ranking should never be considered as a proxy of its creditworthiness.

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

The principal methodology is North American Commercial Mortgage Servicer Rankings (October 20, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

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.

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

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