Overview
- Argentic Services Co. L.P. is a commercial mortgage loan special servicer located in Plano, Texas, that commenced operations in August 2019.
- Argentic Services Co. L.P. is an affiliate of Elliott Investment Management L.P. and Argentic Investment Management LLC, which are managed by entities that are active participants in the CMBS securities market.
- We affirmed our overall AVERAGE ranking on Argentic Services Co. L.P. as a commercial mortgage loan special servicer.
- We revised the ranking outlook to positive from stable.
ENGLEWOOD (S&P Global Ratings) July 12, 2023--S&P Global Ratings today affirmed its AVERAGE ranking on Argentic Services Co. L.P. (ASC) as a commercial mortgage loan special servicer. The ranking outlook is positive, which we revised from stable.
Our ranking reflects ASC's:
- Experienced senior management team and staff, albeit with some elevated turnover across the platform since our last review;
- Active participation in the CMBS market as a B-piece buyer through affiliated entities managed by Argentic Investment Management LLC (AIM) and Elliott Investment Management L.P. (together with its affiliates, Elliott);
- Ultimate majority ownership by funds managed by Elliott;
- Formal training program that supplements on-the-job training;
- Good leverage of a third-party asset management and special servicing system;
- Solid internal control environment; and
- Increasing track record of loan resolutions and real estate-owned (REO) sales in its relatively short history.
Since our prior review (see "Servicer Evaluation: Argentic Services Co. L.P.," published Sept. 16, 2021), the following changes and/or developments have occurred:
- In the second quarter of 2022, two senior asset managers joined a local startup special servicing firm, one of whom the company hired to lead its special servicing operation.
- In the third quarter of 2022, an asset manager voluntarily departed to take a role assisting in the management of an $8 billion equity investment portfolio.
- Replacements include an experienced asset manager with over 30 years in the industry and a commercial real estate (CRE) professional with over five years of industry experience.
- ASC was named special servicer on 12 additional CMBS transactions totaling $2.4 billion in unpaid principal balance (UPB), increasing the total to 40 transactions totaling $21.3 billion in UPB as of Dec. 31, 2022.
- ASC was named special servicer on three additional CRE-CLO transactions totaling $2.7 billion in UPB, increasing the total to five transactions totaling $3.3 billion in UPB as of Dec. 31, 2022.
- Through loan resolution and REO sale activity, the company's active special servicing portfolio declined to 23 assets (15 loans and eight REO assets) with an aggregate UPB of $745.5 million as of Dec. 31, 2022, compared with 47 assets (41 loans and six REO assets) with a total UPB of approximately $1.2 billion as of June 30, 2021.
- During 2021 and 2022, ASC resolved 85 loans with an aggregate UPB of more than $1.9 billion, including 58 loans with a UPB of $1.4 billion that were returned to the master servicer, 39 of which followed a modification and/or forbearance agreement.
- During 2021 and 2022, ASC sold 12 REO properties with gross sales proceeds well over estimated market values and average hold periods generally shorter than peers.
- From July 2021 through December 2022, ASC processed 163 borrower requests, primarily lease consents, modifications, assumptions, waiver of loan provisions, and transfer of ownership.
- During 2022, ASC senior management implemented a more efficient and lower cost staffing model. The model creates stratification in the organization structure and provides junior employees with potentially more career advancement and compensation growth opportunities.
- The company's internal control environment and framework was tested, which included a third-party risk assessment, and operational audits and Regulation AB audits that contained no exceptions or variances.
The ranking outlook is positive. ASC, as a relatively new entity, has successfully demonstrated its capabilities as a commercial mortgage loan special servicer and has continued to perform well despite some turnover in its asset management team. Given the servicer's affiliation with Elliott and AIM, each active CRE debt participants, accompanied by management's extensive special servicing experience, we expect ASC will maintain the people, processes, and technology needed to operate in a manner consistent with industry standards. Should ASC stabilize turnover and continue to build upon its impressive initial track record, we could raise its overall ranking to ABOVE AVERAGE at the time of our next review.
The financial position is SUFFICIENT.
Related Research
- Select Servicer List, May 5, 2023
- Servicer Category Descriptions Expanded And Revised, Feb. 28, 2022
- Servicer Evaluation: Argentic Services Co. L.P., Sept. 16, 2021
- Servicer Evaluation Spotlight Report: Environmental, Social, And Governance Factors Have Consistently Powered Our Servicer Evaluation Rankings, Nov. 16, 2020
- Analytical Approach: Global Servicer Evaluations Rankings, Jan. 7, 2019
This report does not constitute a rating action.
| Servicer Analyst: | Geoffrey C Danek, Englewood + 1 (303) 721 4689; Geoffrey.Danek@spglobal.com |
| Secondary Contact: | Marilyn D Cline, Dallas + 1 (972) 367 3339; marilyn.cline@spglobal.com |
| Analytical Manager: | Robert J Radziul, New York + 1 (212) 438 1051; robert.radziul@spglobal.com |
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