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

DBRS, Inc. (Morningstar DBRS) 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 is Stable.

The primary servicer ranking reflects:
-- A10's expertise with bridge-loan financings on transitional properties as well as other loans requiring intensive asset management. A10 also has a track record of timely and thorough reporting for its commercial real estate collateralized loan obligations (CRE CLOs) and other rated transactions.

-- Although A10 is a relatively smaller-scale servicing operation, it has a well-experienced and tenured management team. Employee turnover increased this year but overall has been moderate over the past few years.

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

-- A10's solid and strengthening technology based on its recent transition to a well-recognized vendor-supported servicing and asset management system. The Company noted that it is increasingly leveraging the system's functionality as well as adding application interfaces to boost operating efficiency. Data security testing protocols and data backup routines, managed through a cloud-computing service provider, are acceptable.

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

As a special servicer, A10 has had modest activity working out distressed loans over its 17-year history. It acquired its first real estate owned (REO) assets in late 2023 and completed its first REO sale in July 2024. However, the Company has proactive practices and a core three-person special servicing team that includes a well-experienced team leader.

As of June 30, 2024, the Company's servicing portfolio contained 304 loan positions (approximately 202 loans when consolidated by related notes tied to the same collateral) with an aggregate unpaid principal balance (UPB) of approximately $2.66 billion. The portfolio contained a mix of property types, including four single-family rental (SFR) loans. Approximately 42% of the portfolio by loan count was held in six securitized transactions. Two of these were commercial mortgage-backed securities transactions and four were bridge/transitional asset and/or CRE CLO financings, including two single borrower-single asset transactions. Bridge/transitional loans were 54.9% of the portfolio by loan positions and 48.8% by UPB.

Except for the SFR loans, A10 serves as the named special servicer for all of its primary serviced portfolio. As of June 30, 2024, the active special servicing portfolio consisted of 23 loan positions (10 loans based on related notes and common collateral) and four REO assets with a total UPB of $208.0 million.

All rankings are subject to surveillance, which could result in rankings being raised, lowered, placed under review, confirmed, or discontinued by Morningstar DBRS.

Morningstar DBRS 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, 2024), https://dbrs.morningstar.com/research/438283.

For more information on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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