Morningstar DBRS Confirms Berkadia's Commercial Mortgage Servicer Rankings

DBRS, Inc. (Morningstar DBRS) confirmed its MOR CS1 commercial mortgage primary servicer ranking and its MOR CS2 commercial mortgage master servicer and special servicer rankings for Berkadia Commercial Mortgage, LLC (Berkadia or the Company). The trend for all three rankings remains Stable.

The confirmed primary servicer ranking recognizes Berkadia's strong professional depth, superior training and career-development programs, and well-established and integrated offshore operations. During the past several years, employee turnover has been relatively moderate. In addition to its accomplished record with commercial mortgage-backed securities (CMBS) and government-sponsored enterprise (GSE) transactions, Berkadia demonstrates diligent portfolio management and servicing expertise for institutional, private equity, and life company portfolios. All three rankings recognize the Company's thorough compliance monitoring practices and extensive internal audit regimen that continually renders satisfactory results.

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. The Company continues to enhance its technology to further boost its workflow management, controls, and reporting capabilities. Last year, the Company also launched an artificial intelligence application to assist internally with selected servicing tasks. A proprietary asset management application effectively addresses special servicing data management and reporting. Berkadia demonstrates effective data backup and recovery testing practices. Additionally, the platform has been independently recognized for its rigorous data security program.

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. Berkadia's subservicer monitoring practices are effective and 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 confirmed special servicer ranking recognizes Berkadia's solid professional depth; proactive surveillance practices; 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 for real estate-secured healthcare credits for these agencies. Over the years, the Company has also successfully managed loans involving other property types in CMBS and other third-party transactions.

As of December 31, 2024, Berkadia's total primary and master servicing portfolio consisted of 20,549 loans with an aggregate unpaid principal balance (UPB) of $416.38 billion. This total included 871 CMBS loans (as primary and/or master servicer), 2,565 Fannie Mae loans, and 3,660 Freddie Mac loans, including 2,924 loans contained in Freddie Mac-sponsored securitizations. The CMBS portfolio included 10 master servicer-only loans with a UPB of $9.95 million involving one subservicer. The Company was also the servicer on 806 securitized single-family rental loans.

As of YE2024, Berkadia was the named special servicer on 438 loans with a total UPB of $6.91 billion, involving 22 rated CMBS and other securitized transactions. Including its specialized loss mitigation and asset management duties for Fannie Mae and HUD loans, Berkadia's total portfolio as a named special servicer encompassed about 4,292 loans with an aggregate UPB of approximately $66.4 billion.

The active special servicing portfolio, as of YE2024, had a total UPB of $907.9 million, which consisted of 26 loan positions (31 properties) and one real estate owned asset. With the exception of one large CMBS office property loan, the portfolio consisted of healthcare and multifamily assets in HUD, GSE, and balance sheet-held transactions. Further, Berkadia's actively managed special-credit portfolio for Fannie Mae and HUD contained 37 loans with a UPB of $843.1 million.

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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