Morningstar DBRS Confirms Commercial Mortgage Special Servicer Ranking for 3650 REIT Loan Servicing, LLC With Stable Trend

DBRS, Inc. (Morningstar DBRS) confirmed its MOR CS3 commercial mortgage special servicer ranking for 3650 REIT Loan Servicing, LLC (3650 Servicing or the Company), a wholly owned subsidiary of 3650 REIT Holding Company LLC (3650 REIT Holdings); 3650 REIT Holdings is a privately held registered investment advisor owned by 3650 Holdings L.P. The trend for the ranking is Stable.

The Company serves as a special servicer for commercial mortgage-backed securities (CMBS) transactions in which 3650 REIT Holdings has controlling positions. In addition, 3650 Servicing serves as a special servicer for a third-party originator and for nonsecuritized loans that are held in various pooled investment vehicles managed by 3650 REIT Holdings.

The confirmed special servicer ranking further reflects the following considerations:
-- The Company's experienced managers and staff collectively having solid backgrounds in special servicing, related CMBS compliance requirements, loan underwriting, deal structuring, and property development/repositioning.
-- The Company's relatively low employee turnover rates for the past few calendar years. Workload levels indicate that the Company has sufficient capacity to handle additions to its special servicing portfolio.
-- The Company's suitable organizational structure, which has separate asset management teams for bridge/transitional loans and for stable cash flow/single-asset single-borrower (SASB) loans. Asset managers also assist with other functions besides special servicing, including surveillance and related portfolio management issues as well as loan and equity real estate investment due diligence.
-- The Company's limited asset resolution history in which only a few loans have required special servicing intervention. To date, 3650 Servicing has acquired and managed one real estate owned (REO) property.
-- The Company's technology capabilities, which include a well-recognized purchased asset management application and acceptable practices for data backup, security, and associated testing.
-- Policies and procedures that denote controlled and proactive CMBS special servicing, including loan workout analytics, investor reporting, and interaction with master servicers. 3650 Servicing also demonstrates diligent practices for portfolio surveillance and handling borrower consent requests.
-- The Company's audit regimen that includes annual Regulation AB attestation and a third-party audit of loan files and transactions to test controls, procedures, and operating efficiencies annually.

As of December 31, 2024, 3650 Servicing was a named special servicer on 573 loans with an aggregate remaining unpaid principal balance (UPB) of $16.69 billion involving 20 CMBS securitizations (including eight SASB transactions) and 89 other loans consisting mostly of its affiliate's investment management portfolio. Approximately 90% of the transactions in which the Company was the named CMBS special servicer had first-loss bond positions that were owned by an affiliate.

As of YE2024, the active special servicing portfolio contained three CMBS loans and one non-CMBS REO property with a combined UPB of $246.1 million. One of the loans was secured by 14 retail properties, and the remaining two loans involved office properties.

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.

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