Fitch Ratings assigned a special servicer rating to Rialto Capital Advisors, asset manager of Rialto Capital Series 2012-LT1. The company recently issued a commercial mortgage-backed security used to unwind distressed properties, a type not seen since before the current economic downturn.
RCA received a CSS2 rating, indicating a high performance in overall servicing ability. The rating is based on Fitch's assessment of RCA's management team, asset management capabilities, investment in technology, and ability to leverage its parent Lennar Corporation.
Rialto Capital, Series 2012-LT1 gained a wave of attention earlier this year for its unique structure. It’s a $132 million securitization made up of mostly nonperforming loans pooled from hotels, offices and retail properties in the Rialto real estate portfolio.
According the deal's first remittance report about $12 million in loans were resolved in April, the bonds' first month of issuance, taking their balance down to $120 million. Trepp analysts said if the pace of resolutions matches the pace in April, the actual average life could turn out to be much shorter.
“Since the market believes this might be the next big thing, we were eager to see how quickly the underlying loans and properties could be resolved,” analysts said.
Analyst at Moody’s Investors Service said the new Rialto CMBS is a single component of the overall cleanup process of the $75 to $100 billion of distressed commercial debt that occupies banks’ books today.
As of March 31, RCA's special servicing portfolio encompassed 6,971 loans totaling $4.4 billion of unpaid principal balance. Included within are 2,075 real estate-owned assets representing about $2 billion UPB. About 64% of the loans are on vacant land (46%) or residential properties (18%).
RCA is a subsidiary of Rialto Capital Management, a division of Lennar Corporation.