Morningstar DBRS Confirms Berkadia's Commercial Mortgage Primary and Master Servicer Rankings, Raises Special Servicer Ranking

DBRS, Inc. (Morningstar DBRS) confirmed its MOR CS1 commercial mortgage primary servicer ranking and its MOR CS2 commercial mortgage master servicer ranking for Berkadia Commercial Mortgage, LLC (Berkadia or the Company). Morningstar DBRS also raised Berkadia's commercial mortgage special servicer ranking to MOR CS2 from MOR CS3.

The confirmed primary servicer ranking recognizes Berkadia's strong professional depth, robust training programs, well-established and integrated offshore operations, extensive internal audit regimen that continually renders satisfactory results, and diligent portfolio management. Through midyear 2024, employee turnover rates have been relatively moderate. In addition to its accomplished record with commercial mortgage-backed securities (CMBS) and government-sponsored enterprise (GSE) transactions, Berkadia is a proficient servicer for institutional, private equity, and life company portfolios.

Berkadia's strong technology platform includes a well-recognized vendor-hosted application, robotic/machine-learning components, a business analytics tool, and robust borrower and client portals. Berkadia has continued to enhance its technology suite to further boost its workflow management, controls, and reporting capabilities. A proprietary asset management application effectively addresses data management and reporting for special servicing. The Company demonstrates comprehensive data security, backup, and testing practices.

The confirmed master servicer ranking acknowledges Berkadia's expertise with CMBS reporting and advancing but also considers the Company's modest portfolio activity involving CMBS subservicers. However, its subservicer monitoring practices are satisfactorily commensurate with the level of required oversight. Berkadia also oversees many correspondent servicers for insurance company clients in which it conducts shadow servicing, monitors data integrity, and provides customized investor reports.

The raised special servicer ranking recognizes Berkadia's solid and strengthened professional depth; highly proactive surveillance practices; and growing and successful asset resolution record, which includes pre-emptive workout solutions involving at-risk or special-credit loans for Fannie Mae and the U.S. Department of Housing and Urban Development (HUD). Berkadia has proved to be an especially adept asset manager and special servicer for real estate-secured healthcare credits for Fannie Mae, HUD, and rated transactions issued through other governmental agencies. The Company has also successfully managed loans involving a variety of property types in CMBS and other third-party transactions.

As of June 30, 2024, Berkadia's total primary and master servicing portfolio consisted of 20,594 loans with an aggregate unpaid principal balance (UPB) of $409.49 billion. This total included 877 CMBS loans (as primary and/or master servicer), 2,504 Fannie Mae loans, and 3,560 Freddie Mac loans, including 2,879 loans contained in Freddie Mac-sponsored securitized transactions. The CMBS portfolio included 12 master servicer-only loans with a UPB of $99.7 million involving two subservicers, of which one serviced 11 of the loans. The Company also was the servicer on 835 securitized single-family rental loans.

As of June 30, 2024, Berkadia was the named special servicer on 414 loans with a $6.86 billion UPB, involving 19 rated CMBS and other securitized transactions. Including its asset management duties and special-credit work for Fannie Mae and HUD, Berkadia's total portfolio as a named special servicer encompassed nearly 4,200 loans with an aggregate UPB of approximately $64.8 billion.

The active special servicing portfolio had a total UPB of $1.18 billion, which consisted of 49 loan positions and one real estate owned asset. The active loan portfolio contained one nonperforming CMBS asset involving a prominent office property in New York City. The active portfolio otherwise consisted of healthcare and multifamily assets in HUD, GSE, and non-CMBS transactions. Berkadia classified approximately 39% of its active special servicing portfolio as performing but requiring extra surveillance and action plans, especially regarding property value preservation. In addition, the Company's actively managed special-credit loans for Fannie Mae and HUD contained 28 loans with a $596.9 million UPB.

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 http://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