Morningstar DBRS Confirms LNR Partners' MOR CS1 Commercial Mortgage Special Servicer Ranking

DBRS, Inc. (Morningstar DBRS) 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 multidecade record as an accomplished special servicer for commercial mortgage-backed securities (CMBS) transactions. The Company continues to be one of the most active and largest-volume special servicers in this sector.

-- The Company's highly experienced management team that includes several managers with exceptionally long tenures. Employee turnover has been moderate for the past few years. Last year, LNR also effectively leveraged its strong professional depth by activating its succession plan to address its former special servicing head's departure. With increasing loan transfers combined with easing real estate owned (REO) portfolio activity, the Company has maintained reasonable workload ratios by tapping into its excess capacity and redeploying certain REO asset managers who have loan workout experience.

-- The formalized training function includes a long-running and highly successful rotational analyst program that some other special servicers have sought to emulate. Several managers and many other employees are graduates of this program.

-- The well-designed organizational structure that includes dedicated in-house legal support, compliance personnel, and specialists for hospitality and REO assets.

-- The Company's comprehensive procedures, which reflect its expertise with CMBS asset management nuances and compliance. REO oversight includes thorough preacquisition due diligence and a property manager audit program.

-- LNR's strong technology platform that centers on a proprietary asset management application integrated with a purchased and customized workflow application, an investor portal, and data repository/analytics tools. The technology suite includes programmed mechanisms to monitor loan-level and pooling and servicing agreement compliance. Data-backup, security, and recovery protocols are thorough, based on recent audits and assessments, routine testing, and upgraded software.

-- A CMBS-centric audit regimen that consists of annual operational examinations, Regulation AB attestations, and formalized vendor qualification and oversight procedures. The latest audit results were all satisfactory. The compliance team also tracks timeliness, accuracy, and adherence to servicing agreement requirements and internal procedures.

As of December 31, 2024, LNR was a named special servicer on 6,141 loans having an aggregate $112.08 billion unpaid principal balance (UPB) involving 196 securitized transactions. The total named special servicer volume included 21 Freddie Mac-sponsored securitizations and three commercial real estate collateralized loan obligation transactions. The Company was affiliated with the controlling classholder (CCH) in approximately 19% of the total transactions. It also 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 YE2024, the active special servicing portfolio (all in securitized transactions) contained 285 loan positions (233 consolidated by shared collateral) and 54 REO assets (71 properties) with a combined UPB of $9.48 billion. As of March 31, 2025, the active portfolio was up slightly with a total UPB of $9.81 billion containing 257 loans (consolidated by shared collateral) and 51 REO assets (61 properties).

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.

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