DBRS Morningstar Assigns Commercial Mortgage Special Servicer Ranking to BREF Partners Special Servicer LLC

DBRS, Inc. (DBRS Morningstar) assigned an MOR CS3 commercial mortgage special servicer ranking to BREF Partners Special Servicer LLC (BPSS or the Company). The trend for the ranking is Stable.

BPSS is a wholly owned subsidiary of Brookfield Asset Management Inc. (Brookfield; rated A (low) with a Stable trend by DBRS Morningstar), which indirectly owns Brookfield Real Estate Financial Partners LLC (BREF), a manager of private, closed-end funds that invest in subordinated debt, including mezzanine positions, for institutional and sovereign entity clients.

BREF’s investment and asset management focus continues to involve large-loan transactions. In early 2020, Brookfield created BPSS principally to serve as the named special servicer for commercial mortgage-backed securities (CMBS) transactions generally in which BREF, through its funds, has B-piece and Horizontal Risk Retention bond investments. While separate legal entities, BPSS and BREF essentially operate as one platform in that they contain the same personnel and share all operating resources.

The assigned special servicer ranking reflects the following factors:

-- BPSS’ well-experienced executive and professional team, many of whom have long tenures at Brookfield. The management team has strong backgrounds in large-loan underwriting, credit oversight, restructuring, and real estate asset management. The average experience of asset managers also is solid.

-- The Company’s adequate technology. BPSS does not have a central asset management application but otherwise adequately handles its data management and reporting needs through spreadsheets and other nonintegrated ancillary applications. Brookfield’s IT department oversees acceptable data backup, security, and testing practices. The Company noted that it predominantly operates in a cloud computing-based environment.

-- BPSS’ limited asset resolution activity. As of March 31, 2022, BPSS was a named special servicer on four loans with an aggregate unpaid balance of $1.41 billion involving four CMBS transactions (four were single-asset/single-borrower). To date, the Company has had no active specially serviced assets in these pools, although it managed two Coronavirus Disease (COVID-19) pandemic-related relief requests (treated as nontransfer consents) in conjunction with a CMBS master servicer. Other activity over the past decade has been limited to a few large-loan foreclosures and corresponding property sales in BREF-managed funds. Currently, BREF has two real estate properties in its managed funds that it acquired through mezzanine positions.

-- The Company’s solid portfolio oversight practices and investment fund reporting capabilities. Surveillance practices include quarterly and semiannual asset reviews. As BPSS has not yet had the opportunity to manage and resolve CMBS assets, the assigned ranking heavily reflects the solid experience of the asset management team as well as its policies and procedures, which infer a controlled and proactive approach to managing specially serviced assets.

All rankings are subject to surveillance, which could result in rankings being raised, lowered, placed under review, confirmed, or discontinued by DBRS Morningstar.

DBRS Morningstar North American commercial mortgage servicer rankings are not credit ratings. Instead, they are designed to evaluate the quality of the parties that service commercial mortgage loans. Although the servicer’s financial condition contributes to the applicable ranking, its relative importance is such that a servicer’s ranking should never be considered as a proxy of its creditworthiness.

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

The principal methodology is North American Commercial Mortgage Servicer Rankings (September 3, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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