DBRS Morningstar Confirms Greystone’s MOR CS1 Commercial Mortgage Servicer and Special Servicer Rankings

DBRS, Inc. (DBRS Morningstar) confirmed its MOR CS1 commercial mortgage primary and special servicer rankings for Greystone Servicing Company LLC (GSC or the Company). The trend for both rankings is Stable.

DBRS Morningstar recognizes GSC’s accreditations and accomplished record as a servicer of multifamily and healthcare portfolios for government-sponsored enterprises (GSEs), the Federal Housing Administration (FHA)/Ginnie Mae, and other agencies and third-party clients. Through its acquisition of C-III Asset Management LLC in December 2019, GSC has a lengthy record as an adept special servicer for commercial mortgage-backed securities (CMBS) transactions and other institutional investors. GSC’s servicing group also has asset managers experienced in resolving troubled GSE and FHA loans.

The confirmed primary servicer ranking further reflects:
-- GSC’s well-designed organizational structure, which features product-type specialist teams. Although GSC’s honed niche is in the agency-sponsored multifamily/healthcare sector, the Company demonstrates sound capabilities to administer loans of other property and transaction types, including non-agency CMBS transactions.

-- GSC’s stability, based on its excellent professional depth and the management team’s long average tenure. The Company experienced an elevated amount of staff turnover over 2021–22, as did many other servicers. However, turnover eased significantly in the second half of 2022. Through proactive recruitment, staff promotions, and flexible workplace arrangements, GSC has been meeting its resource needs to stay ahead of portfolio growth and to maintain reasonable workload ratios. The Company continues to have a strong focus on career development and training.

-- Thorough procedures, which denote expertise with lenders’ myriad reporting and compliance requirements, including their securitization programs. The Company demonstrates attentive borrower relationship management and diligent vendor oversight practices.

-- GSC’s substantial technology infrastructure and integrated suite of purchased and proprietary applications, which include a robust borrower web portal. The Company continues to roll out enhancements, including some robotic processes, to advance automation and compliance management. The cloud-based platform has sound data protection and backup practices, which include a program of security assessments and testing.

-- A solid audit and compliance regimen of internally led audits, Regulation AB attestations, and various agency and other client-led examinations. GSC recently centralized its compliance function under its corporate-level internal audit department to coordinate these activities and resume a program of supplemental compliance reviews. The Company believes this realignment promotes better synergies and offers more resources. GSC’s technology affiliate also undergoes System and Organization Controls 1/Type II examinations. Over the past several years, the collective audit results have been overall satisfactory and contained very few exceptions.

The confirmed special servicer ranking recognizes:
-- GSC’s effective operating structure and well-experienced management. Asset managers’ average experience remains among the highest in the industry. The Company had some high-level departures in 2021 but continues to demonstrate solid leadership and professional depth. Employee turnover has otherwise been moderate. With portfolio volume easing in the past year, the Company has reasonable workload levels.

-- GSC’s thorough analytics and controls, which include comprehensive asset status/resolution cases, sound approval practices, independent compliance audits, real estate owned (REO) property manager audits, and in-house legal oversight. GSC recently moved formal responsibility for REO bank account reconciliations from asset managers to its accounting group, which DBRS Morningstar views as a best practice. Through a manager-level hire, the Company has also expanded its portfolio surveillance practices.

-- The Company’s excellent asset resolution record, which has involved many complex and recovery-challenged loans and REO assets.

-- GSC’s proprietary technology for CMBS-centric special servicing. The core application suite may not be the best in class but is highly functional and addresses CMBS reporting requirements. GSC continues to add features and automation enhancements. It recently revamped the surveillance module as well.

As of YE2022, GSC’s total servicing portfolio consisted of 6,051 loans with an aggregate unpaid principal balance (UPB) of approximately $65.77 billion. By comparison, the total portfolio had 6,111 loans with a $60.28 billion UPB at YE2021. As of YE2022, by loan count, approximately 95% of the portfolio was secured by multifamily-oriented assets, including healthcare, co-operative, and mobile home park properties. By loan count, approximately 36% of the portfolio involved Freddie Mac loans (91% of those were in 280 securitizations), 40% were Fannie Mae loans, 16% were FHA/Ginnie Mae loans, and 2% were contained in five collateralized loan obligation (CLO) transactions.

As of YE2022, GSC was the named special servicer on 53 CMBS transactions (nine had one remaining asset) and 14 Freddie Mac securitizations (12 small balance and two K-Series) that together consisted of 1,689 loans with an approximate UPB of $21.54 billion. Additionally, GSC was special servicer on 76 CLO loans involving three of the five CLO transactions in which it was primary servicer. The Company was affiliated with the controlling bondholder class in about 23% of these total transactions. As of YE2022, the active special servicing portfolio had 40 assets (27 loans and 13 REO) with a total UPB of $1.09 billion. By comparison, at YE2021, the active special servicing portfolio had 77 assets (56 loans and 21 REO properties) with a UPB of $1.85 billion.

All rankings are subject to surveillance, which could result in rankings being raised, lowered, placed under review, confirmed, or discontinued by DBRS Morningstar.

DBRS Morningstar North American commercial mortgage servicer rankings are not credit ratings. Instead, they are designed to evaluate the quality of the parties that service commercial mortgage loans. Although the servicer’s financial condition contributes to the applicable ranking, its relative importance is such that a servicer’s ranking should never be considered as a proxy of its creditworthiness.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American Commercial Mortgage Servicer Rankings (September 8, 2022; https://www.dbrsmorningstar.com/research/402499).

For more information on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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