Sector developments and company hires

Servicers facing ‘unprecedented’ turnover

US commercial mortgage servicers are facing unprecedented turnover levels and filling open positions in the tight labour market may ultimately increase the cost of servicing loans, Fitch suggests. However, the agency notes that to date, there have not been any noted declines in servicing proficiency among Fitch-rated primary, master and special servicers.

Fitch reports lower-than-average employee turnover in its rated servicers in 2020 as employees transitioned to remote working and rode out the uncertainty of shifts in the workplace. “Those uncertainties resolved themselves in 2021, as commercial loan debt issuance stabilised, servicing portfolios began to grow and servicers began hiring again. Simultaneously, long-tenured employees have been taking a closer look at retirement. Additionally, remote working has become a quality-of-life factor, which some employees are less willing to give up as servicers return to the office,” the agency observes.

Collectively, these factors have led to an increase in employee turnover - particularly in the Kansas City, Dallas, Miami and Washington D.C. markets, which have high concentrations of servicers. At the same time, servicers with geographically diverse offices and remote working options generally experienced less turnover, according to Fitch.

While servicers have generally been able to staff up to cater for growing portfolios, the agency has observed a backlog of open positions due to competition for talent. As such, servicers have had to increase compensation expectations for new hires and create more formalised remote-working policies to attract talent. There has also been an increased willingness among servicers to hire staff remotely almost as a defensive measure, as well as a means to recruit experienced talent.

Overall, Fitch expects special servicers - which added staff to address the influx of borrower requests for debt relief and defaults over the last 18 months - to see a decline in staffing as temporary secondments end and lower default volume mitigates the need to backfill asset manager departures.

In other news…

EMEA 

AXA IM Alts has launched a new global secured assets (GSA) strategy in an expansion of existing secured finance products for pension fund clients. The new strategy follows on from the launch of its first GSA initiative (GSA I), which has achieved €2.2bn in assets since 2018. AXA are well established in alternative investments, with an estimated €163bn in total assets, and this new strategy fits within AXAs wider ambitions as a global investment platform. The newest GSA strategy will work to meet the rising demand from pension schemes across Europe and in the UK that are seeking to diversify their investment portfolios.

Hayfin Capital Management have appointed Caoimhe Bain as new head of ESG, in latest bid to further responsible investment practices at the alternative asset management firm. Caoimhe has over ten years of experience in responsible investing within the asset management sector, and will report to Hayfin’s ESG, investment and management committee member, Andrew McCullagh. She will join the global team of over 160 professionals at Hayfin’s, and work to ensure embedded responsible investment practices are continually reviewed, developed, and implemented.

North America

Muzinich has hired Brian Yorke as portfolio manager and global head to lead in launch of its new US and European CLO platform. Yorke joins from Ostrum Asset Management, where he aided the firm’s production of their US loan and European CLO business, and has a further 13 years of experience as head of global performing credit at Bardin Hill Investment Partners.

At Muzinich, Yorke will be aiding its business development alongside head of syndicated loans, Torben Ronberg, in an effort to improve risk management and capital preservation. It is hoped the move will allow for the expansion of floating rate products during a period of “inflationary uncertainty and rates pressures”, explained founder and chairman George Muzinich.

PWM bankruptcy eyed

PWM Property Management, a special-purpose entity that controls the 245 Park Avenue and 181 West Madison loans, has filed for Chapter 11 bankruptcy. The former property secures a US$1.2bn loan securitised across 14 CMBS, including the 245 Park Avenue Trust 2017-245P transaction. The 181 West Madison property secures a US$240m loan securitised across four CMBS transactions.

KBRA says it is monitoring the rating implications of the PWM bankruptcy, but is not taking any rating actions on the affected CMBS it rates at this time - although it will continue to monitor the filing and performance of the related loans. However, the agency notes that should special servicing fees and trust expenses create interest shortfalls to any rated classes across any of the transactions, watch placements and rating actions may be warranted.