Fitch Affirms NSAM's Special Servicer Rating
The special servicer rating reflects Fitch's assessment of NSAM's experienced management team and asset managers, commercial workout experience through collateralized debt obligations (CDOs), as well as its layered control environment and improving asset management technology. The rating also reflects the financial condition of NorthStar Realty Finance Corp (NRF); while they exist as separate entities, the majority of NSAM's revenue is predicated on a contractual fee stream from NRF, which along with the high level of management and operational integration between the two companies, demonstrates the strong link between NSAM and NRF.
On July 1, 2014, NRF spun-off its special servicing and asset management business into NSAM, a separate publicly-traded company. Special servicing and asset management employees, policies and procedures, and technology previously reflected in Fitch's assessment of NSS have been transferred to NSAM. As part of the spin-off, each NRF common stockholder received shares of NSAM common stock on a one-for-one basis, providing common ownership for both NRF and NSAM. NSAM manages NRF assets based on a 20-year management contract, and REIT companies previously sponsored by NRF are now organized under and managed by NSAM. Additionally, NSAM owns the broker-dealer NorthStar Securities (previously owned by NRF) and expanded its operations internationally, with offices opened in the United Kingdom, Luxembourg, and Bermuda.
In 2014 NSAM experienced 23% overall turnover and 35% asset manager turnover as six U.S.-based employees were transferred to the Luxembourg and Bermuda offices; overall turnover has declined to 9% in the past 12 months. NSAM hired two experienced U.S. asset managers in the special servicing group, as well as one asset manager and two supporting middle managers in the portfolio management group. NSAM also hired three middle managers dedicated to IT support and development, increasing the company's overall headcount to 36 from 32 employees.
NSAM has made considerable efforts to build an internal IT group dedicated to enhancing its asset management system as well as exploring other system upgrades such as implementing a data warehouse and Argus Enterprise. NSAM could achieve increased efficiencies from the various technology enhancements which are expected to be implemented in the next 12 months, and which could result in positive rating momentum should technology enhancements and new systems be implemented.
The servicer rating is based on Fitch's methodology, as described in the reports highlighted at the end of this release.
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