DBRS Morningstar Confirms Situs’ Commercial Mortgage Special Servicer Ranking

DBRS, Inc. (DBRS Morningstar) confirmed its MOR CS2 commercial mortgage special servicer ranking for Situs Holdings, LLC (Situs or the Company). The trend for the ranking remains Stable.

The Company operates within the servicing and asset management division of Situs Group LLC, whose parent is SitusAMC Holdings Corporation (collectively, 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 various institutional lenders and investors.

The confirmed 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 experience working out securitized single-family residential (SFR) loans.

-- Operational stability based on overall low employee turnover over the past few years, including no staff-level departures in 2022.

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

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

-- An acceptable internal audit function of Regulation AB attestations and a compliance manager’s monitoring of workflows for timeliness, accuracy, and adherence to servicing requirements. SitusAMC’s compliance team also plans to begin testing the Company’s adherence to the requirements of a corporatewide risk control self-assessment program. Although not centered on special servicing, SitusAMC undergoes annual system and organization controls (SOC 2 Type II) examinations.

-- The Company’s acceptable technology that centers on MIDAS, a proprietary legacy application. To strengthen its data management and reporting capabilities, Situs is developing a customized version of CLOSER, SitusAMC’s proprietary loan origination and management software that it also markets to third parties. Through SitusAMC’s technology department, the Company has sound data backup, security, and testing practices.

As of June 30, 2023, Situs was the named special servicer on 317 transactions containing 2,735 loans with a total $120.90 billion unpaid principal balance (UPB). These transactions consisted of 251 CMBS transactions, 15 Freddie Mac-sponsored securitizations, 36 collateralized loan obligation transactions, and 15 SFR securitizations. Situs was affiliated with the controlling classholder in 35% of the CMBS transactions in which it was the named special servicer.

As of June 30, 2023, the active special servicing portfolio had a total UPB of $3.49 billion and consisted of 139 loan positions (133 in securitized transactions) and 23 real estate owned (REO) positions. Consolidated by related note positions or common collateral, the portfolio contained 78 loan assets and three REO assets (all in CMBS).

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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