Fitch Affirms Rialto Capital Advisors Special Servicer Rating
OREANDA-NEWS. Fitch Ratings affirms the commercial real estate special servicer rating of Rialto Capital Advisors, LLC (RCA) at 'CSS2'.
The special servicer rating reflects RCA's experienced and deep management team, robust asset management capabilities, its ongoing commitment to technology, and the financial condition of its ultimate parent, Lennar Corporation. The rating also reflects continued elevated turnover, due partly to reduced non-performing loan (NPL) volume, the limited nature of internal audit reviews, and less robust disaster recovery capabilities compared to highly rated servicers.
While overall turnover remains elevated at 18% (a trend in previous reviews), turnover has come down from 24%. Asset manager turnover was 13%, which compares favorably to other Fitch rated special servicers. RCA maintains a strong management bench as three senior and 52 middle managers average 14 years of industry experience. Additionally, RCA continues to invest in its special servicing technology, RCAMS, which Fitch believes is an effective tool to manage large volumes of defaults and monitor compliance.
RCA is the operating entity of Rialto Capital Management (Rialto) which was founded in 2007 as a real estate investment and asset management company focused on distressed real estate assets. Rialto is the sponsor of and an investor in nine private equity funds that target opportunistic investments in distressed loans and real estate and subordinate bonds in CMBS 2.0 transactions and mezzanine loans. The company also maintains a commercial real estate loan origination business to originate and securitize non-recourse CRE loans.
Historically focused on small balance NPLs, Rialto has transitioned to an active purchaser of controlling B-pieces and servicer of CMBS 2.0 transactions which make up 98% (by balance) of the company's total special servicing portfolio. At March 31, 2016, RCA was named special servicer on 64 CMBS transactions, up from 26 at Dec. 31, 2013. RCA's active special servicing portfolio continues to be weighted (89% by balance) towards non-CMBS, represented by NPL portfolios.
As of March 31, 2016, RCA was named special servicer on 4,854 CMBS loans totaling $64.9 billion and actively working out 25 defaulted CMBS loans totaling $163 million and three real estate owned (REO) assets with a UPB of $9.6 million. As of the same date, RCA was also named special servicer for 3,132 non-CMBS loans totaling $1.4 billion UPB and was actively working out 1,648 loans with a UPB of $1.1 billion and 1,747 REO with a UPB of $326.8 million.
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