DBRS Morningstar Assigns MOR CS1 Commercial Mortgage Special Servicer Ranking to LNR Partners, LLC

DBRS, Inc. (DBRS Morningstar) assigned a MOR CS1 commercial mortgage special servicer ranking to LNR Partners, LLC (LNR or the Company). The trend for the ranking is Stable.

LNR is 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 assigned ranking reflects the following considerations:

-- LNR’s multidecade track record as an accomplished asset manager and special servicer for commercial mortgage-backed securities (CMBS) transactions. The Company has solid experience with assets in collateralized loan obligation (CLO) transactions as well. DBRS Morningstar also recognizes LNR’s success since the onset of the Coronavirus Disease (COVID-19) pandemic resolving a high volume of distressed loans, including many handled as nontransfer consent requests in collaboration with master servicers.

-- The company’s strong professional depth of highly experienced managers and staff, including many with exceptionally long tenures at the Company. Despite the challenging labor market for employers, LNR has had relatively moderate employee turnover during the past two years. Internal redeployments of managers and staff into and out of special servicing asset management roles during the pandemic accounted for much of this turnover. The Company also demonstrates reasonable asset manager workload ratios, especially as portfolio volume has decreased over the past year.

-- A well-designed organizational structure that addresses all essential functions, including teams for borrower consent requests, surveillance, loan administration support, asset accounting, and investor reporting. The operation includes dedicated in-house legal and compliance personnel as well as an asset management team specifically for hospitality assets.

-- The Company’s comprehensive and proactive procedures, which reflect its honed expertise with CMBS transactional compliance and understanding of best practices.
-- LNR’s excellent and mostly cloud-based computing environment. The technology suite encompasses a proprietary asset management application integrated with a purchased and customized workflow tracking application and data repository/business analytics tools, which collectively provide thorough data management and programmed mechanisms to monitor loan-level and pooling and servicing agreement compliance. Data-backup, security, and recovery protocols are sound based on recent audits and assessments, routine testing, and upgraded software. LNR also has rigid data security requirements for its vendors.

-- Solid audit and CMBS-centric compliance practices, which include annual comprehensive operational audits, Regulation AB attestations, and formalized vendor qualification and oversight procedures. LNR also routinely audits property managers for real estate owned (REO) assets.

As of June 30, 2022, LNR was the named special servicer on 166 CMBS transactions containing 5,884 loans with a total unpaid principal balance (UPB) of $98.74 billion. It also was the special servicer on nine Freddie Mac-sponsored securitizations (four K-Series and five small-balance transactions) containing 631 loans with a total UPB of $5.90 billion. Additionally, LNR was the special servicer on seven CLO transactions containing 127 loans with a total UPB of $3.80 billion. It was affiliated with the controlling classholder (CCH) in 24% of these total CMBS and CLO transactions. However, LNR 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 June 30, 2022, the total active special servicing portfolio (all in securitized transactions) contained 134 loan positions and 188 REO assets (101 consolidated by asset relationships) with a combined UPB of $6.10 billion. Since LNR’s inception in 1993 through June 30, 2022, the Company has resolved 7,133 specially serviced assets with an aggregate UPB of approximately $86.20 billion, including 418 specially serviced assets with an aggregate UPB of $8.10 billion resolved since the start of 2020.

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 (September 3, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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