DBRS Places Berkadia’s Servicer Evaluations Under Review with Developing Implications

DBRS has confirmed the Superior evaluations of Berkadia’s (the Company) Primary and Master servicing capabilities, at the same time DBRS has placed both evaluations Under Review-Developing. The evaluation follows a review of the Company by DBRS after the acquisition by Berkshire Hathaway Inc. (Berkshire) and Leucadia National Corporation (Leucadia). The rationale to place the evaluations on Under Review-Developing is dictated by management’s decision to reallocate select areas of the Company’s services department in an effort to reduce expenses and adjust staffing needs to meet expected demands. The staffing changes are in reaction to runoff within Berkadia’s servicing portfolio and are being made only to high volume segments of the services department, with complex operations remaining unchanged. In all, approximately 5% of the servicing staff members were either laid off or volunteered to be terminated, and Berkadia now plans to leverage its staff in India to a greater degree. The Company remains committed to maintaining high servicing standards but given the current market environment, DBRS considers these steps necessary to the Company’s future success. DBRS will evaluate the impact of these changes over the coming months and provide an update in the first quarter of 2011.

Master and primary servicing have been the primary business units of the Company since 1994. Berkadia Commercial Mortgage LLC is a joint venture between Berkshire Hathaway Inc. (Berkshire) and Leucadia National Corporation (Leucadia). With the acquisition of the Company by Berkshire and Leucadia, the overall financial strength of the Company has been greatly enhanced following the voluntary bankruptcy filing of Capmark in October 2009.

Over the years, the Company has developed a respected industry reputation through its high quality staff, reliable controls over asset administration, proven technology, knowledgeable customer service and thorough investor reporting. The functional structure of Berkadia allows the Company to effectively meet the demands of all areas of servicing. The Company is able serve as a highly skilled and efficient intermediary between borrowers and investors, and ultimately improves overall transparency for multiple parties.

This evaluation reflects a comprehensive review of the Company’s organizational structure, the management team, asset administration, risk or loss management, technology, staffing and training, policies and controls, and financial strength.

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

The applicable methodology is DBRS Commercial Mortgage Servicer Evaluations which can be found on our website under Methodologies.