OREANDA-NEWS. Fitch Ratings has affirmed Situs Global Servicing GmbH's German Commercial Mortgage Primary Servicer rating at 'CPS3+' and upgraded the German Commercial Special Servicer rating to 'CSS3+' from 'CSS3'. The agency has also assigned Situs Asset Management Limited a UK Commercial Mortgage Primary Rating of 'CPS3+'. Situs Global Servicing GmbH and Situs Asset Management Ltd are referred to jointly as 'Situs'.

The ratings reflect the infrastructure changes within Situs and increased experience in loan servicing since the last rating action in April 2011.

The company has strengthened its risk and compliance framework with the appointment of a Director of Risk and Compliance in February 2015. Since this appointment several advances have been made, such as the establishment of a Risk and Compliance Group with representation from all areas of the business including servicing, and a full review of all policy and procedure documents.

To further strengthen the risk management of the company, Situs entered into an outsourcing agreement with an experienced third party provider for internal audit (IA). A full audit cycle has been completed with all findings addressed. However, at the time of review Situs was considering whether to continue with the outsourced arrangement or to bring the IA function in house.

Fitch views the appointment of the Director of Risk and Compliance and the conducting of an IA positively. However, the IA regime is in its infancy and as a result the agency cannot give full credit to the current arrangement. A consistent approach to IA over a number of cycles, as can be seen at rated peers, is considered to be important for effective risk management.

The ratings are also reflective of the advancements in technology that Situs has made. The company has introduced the Enterprise! system as its servicing platform. Enterprise! has helped to improve servicing efficiency as many processes are now automated. Situs also utilises Closer which is an asset management and surveillance system primarily used for producing reports. Situs also has an internet portal named Situs Insight, which provides users with access to real estate news and research. The special servicer upgrade reflects the infrastructure changes mentioned above. Fitch recognises that the special servicing experience continues to increase with the workout of additional loans.

The assignment of the UK Primary Servicer rating reflects the structure of the group which benefits from shared technology, resource, infrastructure and servicing experience. Situs has been servicing UK loans since 2003.

At 30 September 2015, Situs' UK primary servicing portfolio totalled GBP30.4bn, including 184 loans and 11,034 commercial properties. Situs' German primary servicing portfolio totalled EUR2.1bn, including 31 loans and 810 properties. The German special servicing portfolio totalled EUR634m and consists of 15 loans covering 76 properties.

Fitch employed its global servicer rating criteria in analysing the servicer's operations and financial condition, with the former criteria including a comparison of similar German and UK Commercial servicers as part of the review process. The analysis is based on the information provided by Situs.