DBRS Morningstar Confirms A10 Capital’s Primary Servicer and Special Servicer Rankings

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:
-- A10’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.

-- Although A10 is a relatively smaller-scale servicing operation, it demonstrates stability based on its well-experienced and tenured management team and employees, and overall low employee turnover over the past few years.

-- The Company’s surveillance practices include a comprehensive loan risk-rating program, weekly portfolio reviews, 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.

-- Solid technology that centers on McCracken Financial Solutions’ Strategy system used in tandem with Salesforce, along with a proprietary database connected with purchased analytics software. The Company also is transitioning to a new servicing and asset management application that it expects will offer enhanced functionality for portfolio management and help to streamline reporting processes. Data security testing protocols and backup routines, which include a cloud-computing services provider, are acceptable.

-- The Company’s adequately documented policies and procedures and sound audit regimen that encompasses independently conducted quarterly servicing reviews, annual agreed-upon procedures reports, and lender-commissioned audits.

As a special servicer, A10 has had modest need over its 16-year history to work out distressed loans. However, the Company has proactive asset management practices and experienced personnel for this work. The senior asset manager overseeing nonperforming loans receives support from other asset managers handling performing-loan surveillance and credit-related matters as well as from in-house legal counsel.

As of June 30, 2023, the Company's servicing portfolio contained 301 loan positions (198 loans when consolidated by related notes tied to the same collateral) with an aggregate unpaid principal balance (UPB) of approximately $2.53 billion. The portfolio contained a mix of property types, including five single-family rental (SFR) loans. Approximately 37% of the portfolio by loan count was held in seven securitized transactions: two commercial mortgage-backed securities transactions of permanent loans and five bridge loan and/or CLO financings of which two were single borrower-single asset transactions.

Except for its five SFR loans, A10 serves as the named special servicer for all of its primary serviced portfolio. As of June 30, 2023, the active special servicing portfolio consisted of 26 loan positions (12 loans based on related notes and common collateral) with a total UPB of $140.2 million. From 2009 through June 2023, A10 has had only 14 loans default and has not incurred any realized losses to date on commercial real estate loans. As of June 30, 2023, A10 had not managed any real estate owned 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 (August 23, 2023; https://www.dbrsmorningstar.com/research/419592).

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

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