NEW YORK, Dec. 6, 2013 /PRNewswire/ -- Morningstar Credit Ratings, LLC today affirmed its 'MOR CS3' rankings for RAIT Financial Trust (RAIT) as a commercial mortgage primary servicer and commercial mortgage special servicer. The forecast for both rankings remains Stable. The affirmed rankings reflect Morningstar Credit Ratings' assessment of RAIT's operational infrastructure and portfolio administration capabilities. In particular, the affirmed rankings are based on the following composite factors:
- Established commercial real estate collateralized debt obligation (CRE CDO) servicing expertise and recent entry into commercial mortgage-backed securities (CMBS) servicing: In Morningstar's view, RAIT has substantial experience servicing loans contained in CRE CDO portfolios through two well-seasoned transactions. In July 2013, the company issued a floating rate non-REMIC transaction marking its entry as a servicer and special servicer for a securitization with standard CMBS reporting requirements. Morningstar believes that RAIT has the operational capability to serve as a fully competent servicer on this transaction.
- Experienced professional staff and management: Morningstar believes the company has a well-experienced staff and management team. RAIT also had a low staff turnover rate in the past year.
- Proactive asset administration: Morningstar believes that RAIT, overall, has proactive and sound loan administration and asset management practices to address its current portfolio characteristics and associated servicing requirements. While it still services a relatively small portfolio, RAIT, in Morningstar's view, has experience servicing large and complex loan structures.
- An effective internal audit function: RAIT maintains an independent audit program, which consists of quarterly reviews that examine various loan administration and reporting controls. Based on Morningstar's review, recently completed audit reports have been satisfactory.
- Sound technology environment: In Morningstar's view, RAIT's current technology platform acceptably addresses its current servicing and reporting requirements, including its ability to manage a modest amount of special servicing work, and should enable it to soundly handle CMBS loans. The company plans to implement an integrated loan origination and asset management technology application to improve operating efficiency and enhance its data management, workflow, and reporting capabilities. To fulfill this objective, the company recently hired a full-time application developer.
- Modest, but overall successful, special servicing track record: RAIT serves as the special servicer only for its primary serviced loans. The company, currently and historically, has managed a relatively small volume of specially serviced assets. However, Morningstar believes that the company has an experienced loan workout staff, proactive resolution practices, sound asset recovery analytics, and, overall, has achieved solid resolution results.
- Controlled conflicts of interest management: Based on RAIT's stated practices, Morningstar believes that the company is acceptably managing any potential conflicts of interest in its position as a servicer and special servicer.
RAIT is headquartered in Philadelphia, Penn. The company has more than 380 employees, with approximately 21 individuals directly involved in servicing and special servicing. As of June 30, 2013, RAIT had approximately $3.7 billion of assets under management. The direct servicing portfolio was approximately $2.1 billion by unpaid principal balance (UPB) and comprised 253 loans. As of June 30, 2013, the active special servicing portfolio was approximately $61.3 million by UPB and comprised 13 loans.
The forecast for both rankings remains Stable. Morningstar believes that RAIT maintains the operational capabilities to meet all of its current servicing and special servicing duties. Based on its resources and experience, Morningstar also considers RAIT to be fully capable of serving as a CMBS servicer.
To access Morningstar Credit Ratings' operational risk assessment methodology and all published reports, please visit http://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.
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