NEW YORK, April 16, 2014 /PRNewswire/ -- Morningstar Credit
Ratings, LLC today assigned its 'MOR CS2' commercial mortgage
special servicer ranking for AEGON USA Realty Advisors, LLC (AURA). The assigned
special servicer ranking is based on the following factors:
- Highly experienced special servicing and asset management
teams: AURA's management teams are highly experienced in handling
complex distressed assets. Morningstar also has a favorable view of
AURA's history of managing properties as an equity owner.
- Stable operation: AURA has not experienced any employee
turnover since 2010, and its personnel have an average tenure of 19
years.
- Limited track record resolving CMBS assets and reporting to
CMBS investors: While AURA has substantial experience managing
specially serviced assets for its affiliated clients and third
parties, the company has a limited history of managing commercial
mortgage-backed securities (CMBS) assets. AURA also needs more time
as a CMBS special servicer before Morningstar can fully ascertain
the overall quality of its corresponding reporting. Despite AURA's
limited experience with CMBS assets, Morningstar believes that AURA
will be very capable of providing timely and accurate reporting for
CMBS investors.
- Overall successful recoveries involving larger balance assets:
During 2013, AURA resolved specially serviced loans primarily
through restructurings or modifications involving maturity
extensions, followed by full payoffs and completing foreclosures.
While AURA did not sell notes or negotiate discounted payoffs
during this period, it has successfully resolved loans through
these methods in the past. During this same period, AURA sold six
real estate-owned (REO) assets, averaging nearly $10 million in size, and with an average net
proceeds-to-value of 108 percent.
- Well-experienced REO asset management involving complex debt
and equity investments: AURA also invests in commercial real estate
(CRE) properties as an equity investor and has a dedicated team of
highly experienced asset managers to manage those properties. The
company also has broad experience taking title to debt investments.
AURA has a property management audit program and conducted two
property manager audits in 2013. Although AURA has traditionally
incorporated a strategy of holding and repositioning REO assets to
enhance the recoveries that have often exceeded the origination
unpaid principal balance (UPB), Morningstar believes that it has
the requisite experience to manage REO assets in CMBS that are
subject to real estate mortgage investment conduit (REMIC) rules
that limit the holding period for REO assets.
- Sound asset management practices and internal audit function:
AURA has sound practices and procedures for its asset management
functions. However, AURA could conduct more frequent audits of the
special servicing operation to further mitigate operating risk.
AURA reported that the special servicing operation undergoes audits
every two years because it does not consider the special servicing
and asset management areas to be high-risk areas. In Morningstar's
view, special servicers that undergo annual, independent audits
demonstrate best practices. AURA will undergo annual Regulation AB
attestations beginning in 2015 because it recently became a named
special servicer on CMBS assets having those requirements.
- Transparent asset resolution practices and sound conflict of
interest management: AURA has a transparent process for reporting
asset resolutions. It is affiliated with the controlling bondholder
class, AEGON USA Investment
Management, on the CMBS transaction LBUBS2004-C8, for which it is
the named special servicer. AURA noted that it does not purchase
loans out of the CMBS trust or use affiliates for the workout and
liquidation of assets.
- Fully integrated technology platform: AURA's technology
platform fully integrates its systems for servicing and asset
management functions. AURA also recently developed its proprietary
Special Technology Asset Resource application (STAR). The STAR
system is integrated with AURA's servicing system and a third-party
accounting application, which it uses for REO property-level
accounting. In Morningstar's view, STAR should provide a high
degree of centralized data management and automated reporting.
- Sufficient capacity to perform special servicing functions:
Based on Morningstar's calculation of AURA's workload
ratios, AURA appears to have sufficient staff resources to
keep pace with its recent asset transfers. AURA also has dedicated
departments for loan and REO asset management, which have worked
well for the company based on the volume and characteristics of its
portfolio.
- Effective use of internal legal resources: AURA has significant
internal legal resources to assist asset managers with their asset
resolutions, which can help mitigate risks, increase operating
efficiency, and reduce disposition expenses.
As of Dec. 31, 2013, AURA's active
special servicing portfolio had an UPB of approximately
$1.4 billion consisting of 166
assets, compared to an UPB of approximately $1.8 billion consisting of 173 assets as of
Dec. 31, 2012. During 2013, AURA's
asset resolutions were equivalent to approximately 58 percent of
the specially serviced loans by loan count and 8 percent of the REO
assets by property count that the company held as of Jan.1, 2013.
As of the end of 2013, AURA was the named special servicer on seven
CMBS transactions representing 56 loans and one commercial real
estate collateralized debt obligation (CRE CDO) transaction. AURA's
special servicing portfolio as of Dec. 31,
2013 included three CMBS loans, with an aggregate UPB of
approximately $16.1 million, and one
CMBS REO property, which were all received from another special
servicer.
The forecast for the ranking is Stable. As a special servicer,
AURA should be able to maintain the practices and expertise to
serve as an effective special servicer for CMBS and other
investors.
To access Morningstar's operational risk assessment methodology
and all published reports, please visit
https://ratingagency.morningstar.com.
About Morningstar Credit Ratings, LLC and Morningstar,
Inc.
Morningstar Credit Ratings, LLC is a Nationally
Recognized Statistical Rating Organization (NRSRO) that specializes
in structured credit research and ratings, and offers a wide array
of services including new-issue ratings and analysis, operational
risk assessments, surveillance services, data, and technology
solutions.
Morningstar Credit Ratings' rankings, forecasts, and assessments
contained in this press release are evaluations and opinions of
non-credit related risks, and therefore, are not credit ratings
within the meaning of Section 3 of the Securities Exchange Act of
1934 ("Exchange Act") or credit ratings subject to the Exchange Act
requirements and regulations promulgated thereunder with respect to
credit ratings issued by NRSROs.
Morningstar Credit Ratings, LLC is a subsidiary of Morningstar,
Inc. (NASDAQ: MORN), a leading provider of independent investment
research in North America,
Europe, Australia, and Asia. The company offers an extensive line of
products and services for individual investors, financial advisors,
asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 446,000 investment
offerings, including stocks, mutual funds, and similar vehicles,
along with real-time global market data on more than 10 million
equities, indexes, futures, options, commodities, and precious
metals, in addition to foreign exchange and Treasury markets.
Morningstar also offers investment management services through its
registered investment advisor subsidiaries and had approximately
$159 billion in assets under
advisement and management as of Dec. 31,
2013. The company has operations in 27 countries.
Morningstar, Inc. is not an NRSRO and its credit ratings on
corporate and municipal issuers are not NRSRO credit ratings.
©2014 Morningstar, Inc. All rights reserved.
MORN-R
Media Contact:
Michelle
Weiss, +1 267-960-6014 or michelle.weiss@morningstar.com
SOURCE Morningstar, Inc.