DBRS Morningstar Assigns Commercial Mortgage Special Servicer Ranking to Situs Holdings, LLC

DBRS, Inc. (DBRS Morningstar) assigned an MOR CS2 commercial mortgage special servicer ranking to Situs Holdings, LLC (Situs or the Company). The trend for the ranking is Stable.

The Company operates within the servicing and asset management division of Situs Group LLC, whose parent is SitusAMC Holdings Corporation (collectively branded as SitusAMC). Across all business lines, SitusAMC provides commercial and residential real estate advisory services, third-party servicing and asset management, outsourcing, staffing, and technology services to a large number of institutional lenders and investors. As a special servicer, Situs principally serves as a third-party service provider.

The assigned special servicer ranking reflects the following factors:

-- A well-experienced management team and asset managers, whose combined ranks include several industry veterans. Besides handling complex troubled assets in commercial mortgage-backed securitizations (CMBS), the team also has established experience with single-family residential (SFR) transactions.

-- The Company’s successful resolution record for a moderate volume of loan workouts and liquidations, which has principally involved large-loan or single-asset CMBS transactions.

-- Solid analytics and controlled asset resolution and reporting practices.

-- An adequate internal audit process, which essentially consists of annual Regulation AB attestations. Situs established a corporate-mandated risk control self-assessment framework in 2021. A dedicated compliance manager oversees asset transfers and independently monitors portfolio activity and servicing agreements for timeliness and accuracy using various tracking reports. A system and organization controls (SOC 2 Type II) examination of SitusAMC issued in April 2022 was overall satisfactory. However, after 2019, Situs discontinued its annual practice of undergoing its own third-party internal audits.

-- Situs’ acceptable technology, which centers on MIDAS, a proprietary legacy asset management application. Although MIDAS sufficiently addresses Situs’ needs, the Company has not routinely enhanced it and many of Situs’ peers have applications providing much greater functionality. Accordingly, the Company noted that it intends either to overhaul or ultimately replace the application. Through SitusAMC’s technology department, the Company has sound data backup, security, and testing practices.

As of June 30, 2022, Situs was the named special servicer on 302 transactions containing 2,985 loans with a total $119.97 billion unpaid principal balance (UPB). These transactions consisted of 241 CMBS transactions (containing 478 loans with a total $97.38 billion UPB), 13 Freddie Mac securitizations (containing 696 loans with a total $2.09 billion UPB), 32 collateralized loan obligation transactions (containing 608 loans with a total $17.19 billion UPB), 14 SFR securitizations (containing 1,022 loans with a total $3.30 billion UPB), and two balance sheet portfolios (containing five loans with a total $11.0 million UPB). The June 30, 2022, named special servicing volume incorporates approximately $18.89 billion in acquired transactions in 2020–21 from Aegon USA Realty Advisors, LLC and the former Cohen Financial, which was a division of SunTrust (now Truist).

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 8, 2022), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

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

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