NEW YORK (S&P Global Ratings) Oct. 16, 2018--S&P Global Ratings today affirmed its ABOVE AVERAGE ranking on C-III Asset Management LLC (C-III) as a commercial mortgage loan primary servicer and its STRONG ranking as a commercial mortgage loan special servicer. The outlooks are stable.
Our rankings reflect C-III's:
• Seasoned and experienced management team and staff;
• Good leverage of technology systems;
• Effective staff training;
• Strong audit, compliance, and quality control environment;
• Substantial and efficient resolution track record of specially serviced
loans and real estate-owned (REO) assets based on volumes and duration; and
• Solid operating history, despite its modest scale and reduced depth in primary servicing, including limited investor diversity concentrated in an interim/pre-securitization loan book.
Since our prior review (see "Servicer Evaluation: C-III Asset Management LLC,"
published Feb. 28, 2017) the following changes and/or developments have
• In July 2017, the prior president of C-III resigned for personal reasons;
the chief operating officer absorbed his responsibilities and title.
• Compliance and internal audit for C-III was restructured in July 2017 to
report directly to C3CP and is now functioning as a designated
independent internal audit and compliance group. The Director of the
group, who reports to C3CP's Chief Compliance Officer, is supported by
members of C3CP's compliance department and a member of C-III's
• The compliance and internal audit department implemented a risk
assessment and annual internal audit plan for C-III in the first quarter
• In March 2018, in conjunction with an involuntary reduction in force of
27 special servicing personnel, the loan and REO asset managers and
associated assets were redistributed. The restructure also led to the
consolidation of the loan team to one senior group leader that reports to
the senior managing director.
• Overall special servicing headcount decreased to 58 full-time employees
compared with 100 as of Dec. 31, 2016, in response to a reduction in the
• The senior vice president of investor reporting within primary servicing
added the role of loan operations manager with direct supervision of tax,
insurance, and new loan setup in order to streamline operations and
enhance the control environment.
• C-III relocated its staff to different suites within the same office
building in Irving, Texas; during that move, the secondary data center
room relocated to the Allentown, Penn. data center.
• C3CP established a vendor management program, which utilizes a web-based
platform, to address information security risk in vendor engagements.
• C-III created and documented a formal IT operations policy to provide
clarity of operational control objectives and alignment to the National
Institute of Standards and Technology series of cybersecurity controls.
• The number of deals in C-III's named special servicing portfolio
decreased to 125 from 140 since our last review. At the same time, the
underlying collateral declined to $20.8 billion (1,674 loans) of unpaid
principal balance from $60.5 billion (approximately 4,700 loans), largely
due to the substantial run-off of maturing loans from pre-crisis deals.
• Active special servicing volume declined to $4.8 billion (117 loans; 147
REO loans) from $9.7 billion (322 loans; 154 REO loans) as resolution
activity has far outpaced new loan transfers.
The outlook for the primary servicer ranking is revised to stable from
negative. C-III's experienced staff continues to conducts its primary
servicing operations in a controlled manner. Although the scale of the
business and the associated staffing continues to be modest following the 2015
termination of a subservicing agreement with its then largest client, we
believe management remains committed to the platform as evidenced by an
increase in volume to $11.7 billion (267 loans) compared with $4.5 billion
(185 loans) as of our prior review.
The outlook for the special servicing ranking remains stable. Despite a recent
reduction in force that accompanied a substantial decline in its defaulted
loan volume, C-III did not experience any degradation of its special servicing
team's average experience and tenure levels since our prior review. While we
anticipate further asset management staff reductions before year's end, we
expect C-III to maintain core staff levels as loan counts fluctuate as well as
continue to invest in systems and other resources necessary to manage its
portfolio according to industry standards.
The financial position is SUFFICIENT.
• Criteria - Structured Finance - Servicer Evaluations: Revised Criteria
For Including RMBS, CMBS, And ABS Servicers On Standard & Poor's Select
Servicer List, April 16, 2009
• Criteria - Structured Finance - Servicer Evaluations: Servicer Evaluation
Ranking Criteria: U.S., Sept. 21, 2004
• Select Servicer List, Sept. 26, 2018
• Servicer Evaluation: C-III Asset Management LLC, Feb. 28, 2017
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