DBRS Morningstar Raises Argentic Services Company’s Commercial Mortgage Special Servicer Ranking to MOR CS2 from MOR CS3

DBRS, Inc. (DBRS Morningstar) raised its commercial mortgage special servicer ranking for Argentic Services Company LP (ASC or the Company) to MOR CS2 from MOR CS3. The trend for the ranking is changed to Stable from Positive. ASC is an affiliate of Argentic Investment Management LLC (AIM) and funds managed by AIM. Funds managed by Elliott Investment Management L.P. control ASC’s general partner. ASC launched its operations in early 2020. The raised ranking reflects:

-- ASC’s growing and successful asset resolution record. The Company has proved to be an adept special servicer for complex commercial mortgage-backed securities (CMBS) and collateralized loan obligation (CLO) transactions involving assets secured by various property types across the United States.

-- A sound organizational framework to address all essential functions, including support from AIM for shared corporate-level resources.

-- Personnel collectively having strong backgrounds in CMBS special servicing best practices and pooling and servicing agreement compliance. Although ASC may have some key-person risk, nearly the entire executive team of industry veterans has been with the Company since inception. Through 2022, ASC, as with some of its peers, continued to have an elevated amount of employee turnover. In ASC’s case, this was largely associated with the highly competitive market for experienced asset managers in the Dallas area. However, the Company has maintained reasonable workload levels and its active portfolio decreased over 2022, thereby obviating the need to refill every position.

-- The Company’s thorough analytics and controlled, proactive procedures for asset management, surveillance, and delivering CMBS-centric investor reporting content. DBRS Morningstar believes the Company is especially diligent in its reporting to rating agencies and other transaction parties.

-- An effective cloud-based computing environment that centers on the purchased RealINSIGHT® (RI) application for asset management and special servicing. Through vendor agreements, ASC has sound protocols for data security, data backup, and testing.
-- Solid audit and CMBS-centric compliance practices that include an annual comprehensive operational audit, Regulation AB attestations, a formalized vendor oversight program, and real estate owned (REO) property manager audits. ASC’s effective use of the RI application for monthly compliance tracking further supports its efforts to ensure timeliness, accuracy, and tight controls.

As of December 31, 2022, ASC was a named special servicer on 1,206 loans with an aggregate remaining unpaid principal balance (UPB) of $24.6 billion involving 45 CMBS securitizations (including 12 single-asset/single-borrower transactions) and five CLO transactions.

As of December 31, 2022, the active special servicing portfolio contained 23 assets (15 loan positions and eight REO assets, with a combined UPB of approximately $745.5 million. By comparison, as of December 31, 2021, the active special servicing portfolio contained 42 assets (29 loan positions and 13 REO assets) with a combined UPB of approximately $1.11 billion. ASC received its first asset transfers in May 2020. Since that time through December 2022, it resolved 78 loans and sold 13 REO assets.

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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