OREANDA-NEWS. S&P Global Ratings today affirmed its AVERAGE rankings on RAIT Financial Trust (RAIT) as a commercial loan primary and special servicer. The outlooks for both rankings are stable.

Formed in August 1997, RAIT is an internally managed, self-advised REIT. RAIT functions as a vertically integrated commercial real estate company that can originate commercial real estate loans, acquire commercial real estate properties, and invest in, manage, and service commercial real estate assets. As of June 30, 2016, its primary servicing portfolio consisted of approximately 250 loans with an aggregate unpaid principal balance (UPB) of nearly $2.4 billion. RAIT currently serves as the servicer and special servicer for three commercial mortgage-backed securities (CMBS) floating-rate transactions totaling $639 million and two self-issued commercial real estate/collateralized debt obligation (CRE/CDO) pools totaling nearly $1.2 billion. The balance of its primary servicing portfolio is largely balance-sheet and warehouse loans.

Key Ranking Factors:The ability to service a demanding yet smaller-scale and somewhat less diverse portfolio than many other servicers we evaluate;An experienced, but modestly sized, servicing and asset management staff for loan administration and portfolio management, with a track record of servicing loans for its own balance sheet, CMBS, CRE CDOs, and, to a lesser extent, third-party investors;The company's technology applications allow it to conduct the required reporting on its CMBS and CRE CDO assets effectively;Documented policies and procedures for loan administration, portfolio management and special servicing;Our positive assessment of the company's internal audit program, which includes independently conducted quarterly compliance reviews, but which is tempered by recent exception findings as well as identified material weaknesses in internal controls during 2014, which were remediated in 2015;Recently elevated staff turnover;While RAIT owns a significant equity real estate portfolio (90 properties valued at $2.2 billion as of June 30, 2016), it has no reported track record for the foreclosure and management of real estate owned properties; andSpecial servicing business plans are less robust than higher-ranked special servicers. Since our prior review, RAIT has made these key changes:RAIT's chief operating officer and its chief credit officer departed in late 2014 and their duties were absorbed by RAIT's president and two senior managing directors (in asset management and lending);After experiencing limited turnover during 2015, RAIT has experienced significant turnover during the first half of 2016;Upgraded Enterprise! servicing software to a newer version in October 2015;Rollout of a new proprietary data warehouse system for underwriting; andIn September 2015, Independence Realty Trust, 15.4% owned by RAIT (but consolidated with its financial results), acquired Trade Street Residential, boosting the number of multifamily properties and units owned (a total of 62 properties and 17,197 units, respectively, as of June 30, 2016).The outlook for both rankings is stable. We believe RAIT has the operational infrastructure and abilities to serve as an effective commercial mortgage primary and commercial mortgage special servicer.