DBRS Morningstar Confirms A10 Capital, LLC’s MOR CS2 Primary Servicer Ranking and MOR CS3 Special Servicer Ranking

DBRS, Inc. (DBRS Morningstar) confirmed its MOR CS2 commercial mortgage primary servicer ranking and MOR CS3 commercial mortgage special servicer ranking for A10 Capital, LLC (A10 or the Company). The trend for both rankings remains Stable.

The primary servicer ranking recognizes the Company’s expertise with bridge-loan financings on transitional properties as well as other loans requiring intensive asset management. A10 also provides timely and thorough reporting for its collateralized loan obligations (CLOs) and other rated transactions. In addition, DBRS Morningstar acknowledges the Company’s efforts in providing timely and accurate replies in response to portfolio surveillance inquiries.

As with other smaller-scale servicing operations, A10 has some key employee risk. However, the Company continues to demonstrate stability, benefiting from a well-experienced and tenured management team and employees. Turnover was limited during 2021.

The Company’s surveillance and asset management practices include a comprehensive loan risk-rating program, weekly portfolio review meetings, effective borrower compliance monitoring, and semiannual loan performance reports. A relatively low loans-per-employee ratio aligns with the high-touch demands of the portfolio.

The Company continues to use McCracken’s Strategy in tandem with Salesforce as its core applications, while an initiative is under way to enhance its technology platform. The servicer’s technology security testing protocols and data backup routines, which include a cloud-computing service provider, are acceptable.

The Company’s sound control practices include a credit committee approval process and an audit regimen encompassing quarterly servicing reviews conducted by a third-party audit firm, annual agreed-upon procedure reports, and lender-commissioned audits. A10 stated that it plans to update its procedural guides as part of implementing any new core technology applications.

As a special servicer, A10 has proactive asset management and experienced personnel but has had modest need over its 15-year history to work out distressed assets. Special servicing asset managers, which handle portfolio surveillance and credit-related matters for all serviced loans, collectively are well experienced. An in-house legal team and other senior managers provide additional support for special servicing. A10’s diligence as a servicer also infers a similarly proactive and controlled approach for resolving troubled loans.

As of December 31, 2021, A10’s servicing and asset management portfolio contained 377 loan positions with an aggregate unpaid principal balance (UPB) of approximately $2.31 billion, of which 72 loans with a $309.6 million UPB were serviced for third parties. By comparison, at YE2020, A10’s servicing and asset management portfolio contained 343 loan positions with an aggregate $1.79 billion UPB. As of YE2021, the dominant property types by loan count were retail and office, each at 27%, and multifamily at 18%. Other property types were industrial, self-storage, lodging, single-family rental, and land. Approximately 40% of the portfolio by loan count was held in five securitized transactions (two permanent asset/commercial mortgage-backed security–type and three bridge asset/CLO–type financings).

A10 is the named special servicer for every loan it originates and services. As of YE2021, the active special servicing portfolio had six loans (based on borrower relationships and related note positions) collateralized by 13 properties with a total UPB of $97.2 million. A10 originated and owned three of these loans ($66.3 million UPB) and specially serviced the other three loans ($30.8 million UPB) on behalf of third parties.

All rankings are subject to surveillance, which could result in rankings being raised, lowered, 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 (September 3, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277