NEW YORK, Dec. 12, 2014 /PRNewswire/ -- Morningstar Credit Ratings, LLC today affirmed its 'MOR CS3' commercial mortgage primary and special servicer rankings for RAIT Financial Trust. Morningstar also revised its primary servicer ranking forecast for RAIT to Favorable from Stable and maintained its Stable special servicer ranking forecast. The commercial mortgage primary and special servicer rankings and forecasts are based on the following factors:


    --  Established servicing expertise in commercial real estate collateralized
        debt obligations (CRE CDO) and growing experience as a servicer for
        commercial mortgage-backed securities (CMBS) transactions: Morningstar
        believes RAIT is a competent servicer for securitizations. RAIT has
        solid experience servicing loans in CRE CDO portfolios and also serves
        as an interim servicer for fixed-rate conduit loans until they are sold
        into CMBS transactions. Since 2013, RAIT has issued three floating-rate
        CMBS transactions for which it retains all primary and special servicing
        work.
    --  Experienced professional staff and management: In Morningstar's view,
        RAIT has a well-experienced staff and management team with low employee
        turnover. RAIT's organizational structure and existing staff levels
        suitably address the company's loan portfolio requirements, and the
        company has some additional capacity to accommodate portfolio growth.
    --  Proactive asset management: While it services a relatively small yet
        growing portfolio, RAIT has proactive practices and experience servicing
        complex loan structures, which include mezzanine and preferred equity
        positions. Additionally, Morningstar believes RAIT has expertise in
        servicing loans with cash-management agreements, albeit with some manual
        elements involved in the process, which constitute most of the serviced
        portfolio.
    --  Effective internal audit function: RAIT has an effective audit program
        administered through an external firm, which conducts quarterly
        compliance reviews that examine various loan administration and
        reporting controls. Morningstar reviewed RAIT's most recent compliance
        reports and observed they were all satisfactory and did not contain any
        material findings or exceptions.
    --  Sound and potentially improving technology: Morningstar believes RAIT's
        technology platform acceptably addresses its current portfolio
        management and reporting requirements, including its ability to manage a
        modest amount of special servicing work. RAIT uses PNC/Midland's
        Enterprise® servicing system for loan accounting and administration and
        a stand-alone, customized Microsoft Access database for some special
        servicing and asset management reporting. In 2014, the company developed
        and began using an integrated application to manage its loan-origination
        and underwriting processes. RAIT plans to add asset management
        functionality to the application during the next 12 to 24 months to
        improve its data management and reporting capabilities for the servicing
        portfolio.
    --  Successful loan resolution history as a special servicer: RAIT only
        serves as the special servicer for its primary-serviced loans.
        Morningstar believes the company has an experienced loan-workout staff
        and proactive, controlled loan-recovery practices. Although RAIT has
        managed only a small volume of specially serviced assets at any one
        time, the company has achieved solid resolution results through
        different methods, primarily through loan modifications. The company has
        not managed or sold any real estate-owned (REO) properties in recent
        years. Based on RAIT's personnel and track record for its CRE CDO pools,
        Morningstar believes the company remains adequately positioned for
        third-party special servicing assignments, including those for CMBS
        transactions.
    --  Controlled conflict of interest management: Based on RAIT's stated
        practices, Morningstar believes the company is acceptably managing any
        potential conflicts of interest in its position as the servicer, special
        servicer, and principal investor for its two CRE CDOs.

As of June 30, 2014, RAIT had approximately $5.30 billion in assets under management, consisting of commercial real estate mortgage and mezzanine loans, direct ownership positions and preferred equity in commercial real estate, and corporate loans issued through trust-preferred securities. The primary servicing portfolio consisted of 281 loans with an unpaid principal balance (UPB) of approximately $2.23 billion. The active special servicing portfolio consisted of 14 loans with a UPB of approximately $106.20 million. RAIT's servicing portfolio included 172 loans from the company's two seasoned CRE CDO portfolios and 33 commercial real estate loans from its first two floating-rate securitizations.

Morningstar revised the forecast for the primary servicer ranking to Favorable from Stable, while the forecast for the special servicer ranking remains Stable. Morningstar believes RAIT has the operational capabilities to serve as a competent commercial mortgage primary and special servicer for CMBS transactions and other third-party investors.

The Favorable forecast for the primary servicer ranking reflects the company's steadily increasing experience with CMBS reporting, plan to expand its recently developed loan origination/underwriting application with integrated asset management functionality, and performance handling the requirements of its floating-rate securitizations, producing consistently satisfactory audit results and maintaining controlled and proactive loan administration practices within a growing portfolio.

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 noncredit 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. Morningstar, Inc. 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 479,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 13 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 investment advisory subsidiaries and had approximately $169 billion in assets under advisement and management as of Sept. 30, 2014. The company has operations in 27 countries.

Morningstar, Inc. is not an NRSRO, and its credit ratings on corporate issuers are not NRSRO credit ratings.

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