DBRS Morningstar Confirms MOR CS3 Ranking for BREF Partners Special Servicer

DBRS, Inc. (DBRS Morningstar) confirmed its MOR CS3 commercial mortgage special servicer ranking for BREF Partners Special Servicer LLC (BPSS or the Company). The trend for the ranking remains Stable.

BPSS is a wholly owned subsidiary of Brookfield Corporation (Brookfield), which indirectly owns Brookfield Real Estate Financial Partners LLC (BREF), a manager of private, closed-end funds that invest in subordinated debt and mezzanine positions. BREF’s investment and asset management focus principally involves large-loan transactions.

In early 2020, Brookfield created BPSS to serve as the named special servicer for commercial mortgage-backed securities (CMBS) transactions in which the BREF-managed funds hold subordinate bond investment positions. 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 confirmed ranking gives weight to the well-experienced executive and professional team, many of whom have long tenures at Brookfield. The management team and staff collectively have strong backgrounds in loan structuring and underwriting, credit oversight, and real estate asset management. Although BPSS has not yet managed any specially serviced CMBS loans, BPSS/BREF over the past decade has foreclosed and taken control over some large assets, repositioned the properties to enhance value, and completed the subsequent sales.

The ranking also recognizes the Company’s stated surveillance practices that indicate proactive and acceptably controlled asset management. The adequate audit function essentially consists of annually required Regulation AB attestations that have been clear of exceptions.

BPSS does not have a central asset management application but adequately handles data management and reporting through spreadsheets and other nonintegrated applications. Brookfield’s information technology department oversees acceptable data backup, security, and testing practices.

As of June 30, 2023, the Company was a named special servicer on nine loans with an aggregate $3.04 billion unpaid principal balance involving seven CMBS transactions (four single-asset/single-borrower transactions) and two securitized loans for an insurance company affiliate. BPSS also continues to handle any special servicing work for non-securitized loans in the BREF-managed debt funds. As of June 30, 2023, BPSS had one active specially serviced real estate asset acquired by a BREF-managed fund through its mezzanine financing position a few years ago. BPSS has been repositioning the asset for a refinancing or sale.

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.

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