DBRS Morningstar Confirms LNR Partners’ Special Servicer Ranking

DBRS, Inc. (DBRS Morningstar) confirmed its MOR CS1 special servicer ranking for LNR Partners, LLC (LNR or the Company), a wholly owned subsidiary of Starwood Property Trust, Inc., which is an affiliate of private equity investment firm Starwood Capital Group Global, L.P. The trend for the ranking remains Stable.

The confirmed ranking reflects the following considerations:

-- LNR’s extended multidecade track record as an accomplished asset manager and special servicer for commercial mortgage-backed securities (CMBS) transactions. The Company has solid experience with assets in collateralized loan obligation (CLO) transactions as well. The Company continues to be one of the most active and largest-volume special servicers in this sector.

-- The highly experienced management and professional team, including many managers with exceptionally long tenures at the Company. Employee turnover rates, despite the challenging labor market, have been relatively moderate and lower when netting out people who transferred to other LNR or Starwood business lines. Workload ratios continue to be quite reasonable. The formalized training function includes a long-running rotational analyst program that some other special servicers have sought to emulate.

-- A well-designed organizational structure that addresses all essential functions. The operation includes dedicated in-house legal and compliance personnel as well as an asset management team specifically for hospitality assets.

-- The Company’s comprehensive procedures, which reflect its honed expertise with CMBS transactional compliance. Real estate owned (REO) property oversight includes proactive preacquisition due diligence and a property manager audit program.

-- LNR’s excellent technology, which now resides almost entirely in a cloud-computing environment. A dedicated team oversees a proprietary asset management application integrated with a purchased and customized workflow application, investor portal, and data repository/business analytics tools. The technology suite, which LNR continues to enhance, provides thorough data management and programmed mechanisms to monitor loan-level and pooling and servicing agreement compliance. Data-backup, security, and recovery protocols are sound based on recent audits and assessments, routine testing, and upgraded software. LNR also has rigid data security requirements for its vendors.

-- A solid audit and CMBS-centric compliance regimen that includes annual operational audits, Regulation AB attestations, and formalized vendor qualification and oversight procedures. The latest audit reports contained no material exceptions.

As of June 30, 2023, LNR was a named special servicer on 177 securitized transactions (including 11 single asset-single borrower transactions) having an aggregate $105.22 billion unpaid principal balance (UPB) and 6,687 loans. The total named special servicer volume included 12 Freddie Mac-sponsored securitizations (five K-Series and seven small-balance transactions) containing 906 loans with an aggregate UPB of $6.18 billion and four CLO transactions containing 133 loans with an aggregate UPB of $3.27 billion. The Company was affiliated with the controlling classholder (CCH) in 21% of the total transactions. However, LNR holds minority B-piece investments in many of the CMBS transactions with third-party CCHs in which it is the named special servicer.

As of June 30, 2023, the total active special servicing portfolio (all in securitized transactions) contained 113 loan positions and 156 REO properties (91 REO assets on a consolidated basis) with a combined UPB of $5.68 billion.

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 (August 23, 2023; https://www.dbrsmorningstar.com/research/419592).

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

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277