Morningstar DBRS Confirms MOR CS3 Ranking for BREF Partners Special Servicer LLC

DBRS, Inc. (Morningstar DBRS) confirmed its MOR CS3 commercial mortgage special servicer ranking for BREF Partners Special Servicer LLC (BPSS or the Company), a subsidiary of Brookfield Asset Management Ltd. (BAM), which is majority owned by Brookfield Corporation (Brookfield). The trend for the ranking remains Stable.

BAM indirectly owns the manager entities of private, closed-end real estate funds, known as the BREF funds, which invest in subordinated debt and especially mezzanine positions. The BREF funds' investment and asset management focus centers on large-loan transactions. BPSS serves as the named special servicer for commercial mortgage-backed securities (CMBS) transactions generally in which BREF funds hold B-piece bond investments. BPSS and the BREF investment management team essentially operate as one platform in that they contain the same personnel and share all operating resources.

The confirmed ranking recognizes the well-experienced executive and professional team, many of whom have long tenures in the organization. The management team and staff collectively have strong backgrounds in loan structuring and underwriting and real estate asset management. Although BPSS has not yet managed any specially serviced CMBS loans, the BPSS/BREF team 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 reflects the following:

-- Low employee turnover since YE2022. The Company also added staff this year to address increased portfolio management activity.

-- The BPSS/BREF team's expertise and proactive portfolio management with large, highly structured loans.

-- An adequate audit function. As required for the rated CMBS transactions in which BPSS is a named special servicer, the audit function consists mainly of annual Regulation AB attestations that have been clear of exceptions.

-- BPSS' adequate technology capabilities for data management and reporting, which it handles through spreadsheets and other nonintegrated applications that mostly reside in a cloud computing-based environment. The BREF funds also provide a portal for investors to obtain portfolio information and to exchange documents. Brookfield's information technology department oversees acceptable data backup, security, and testing practices.

As of June 30, 2024, BPSS was a named special servicer on seven CMBS transactions (one loan per transaction) and one securitized loan for an insurance company affiliate that had a combined $3.41 billion unpaid principal balance. The Company was affiliated with the controlling class holder in all of these transactions.

As of June 30, 2024, as the special servicer for nonsecuritized BREF loans, BPSS managed 11 troubled loans (38 properties) and four real estate owned (REO) assets that the funds acquired through mezzanine positions. All of the REO assets are subject to third-party senior debt positions.

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

Morningstar DBRS 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, 2024), https://dbrs.morningstar.com/research/438283.

For more information on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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