Morningstar DBRS Confirms Situs' Commercial Mortgage Special Servicer Ranking

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

Situs 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, and outsourcing, staffing, and technology services to institutional lenders and investors. The confirmed ranking reflects the following factors:

-- A highly experienced management team and asset managers, whose combined ranks include several industry veterans. The organizational structure encompasses a team for borrower consent requests, an investor reporting manager, and some shared resources from SitusAMC. A relatively low amount of employee turnover over the past three years indicates operational stability.

-- Situs' successful asset resolution record, which predominantly has included a moderate volume of assets in CMBS transactions. The Company also has experience working out loans in single-family residential (SFR) transactions.

-- Solid analytics and controlled asset resolution and reporting practices. Real estate owned (REO) management includes audits of property managers.

-- An acceptable audit regimen that centers on Regulation AB attestations and a compliance manager's monitoring of workflows for timeliness, accuracy, and adherence to servicing requirements. To strengthen its audit function, SitusAMC established an independent internal audit department this year by hiring a chief auditor who is building a program to cover all business lines. Additionally, SitusAMC's corporate compliance team annually tests the Company's adherence to the requirements of a corporatewide risk control self-assessment program that launched in 2023.

-- A solid and evolving technology platform, which currently centers on a proprietary legacy asset management application. The application sufficiently addresses Situs' needs and now has an interface with a data warehouse and analytics/reporting tool. However, the Company is transitioning to a well-recognized vendor-supported special servicing/asset management application that it expects will offer a much higher degree of data management and reporting functionality. Through SitusAMC's technology department, the Company has effective data backup, security, and testing practices.

Morningstar DBRS will continue to monitor the Company's progress in implementing its new audit program, its conversion to the new asset management application, and its efforts to streamline and integrate some other technology tools.

As of June 30, 2024, Situs was the named special servicer on 2,530 loans with an aggregate unpaid principal balance (UPB) of $113.7 billion involving 309 transactions. These transactions consisted of 244 CMBS transactions, 16 Freddie Mac securitizations, 32 commercial real estate collateralized loan obligation transactions, and 17 SFR securitizations. Situs was not affiliated with the controlling classholders in any transactions.

As of June 30, 2024, the active special servicing portfolio had a total UPB of $3.09 billion and consisted of 182 loan positions and 64 REO properties (131 loans consolidated by related notes and 15 REO assets consolidated by property relationships). The active portfolio included 36 SFR loans (734 properties) with an aggregate UPB of $104.8 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 http://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