Fitch Takes Rating Action on Green Loan Services' Commercial Mortgage Servicer Rating

NEW YORK--()--Fitch Ratings has downgraded the commercial mortgage loan level special servicer rating of Green Loan Services LLC (GLS) to 'CLLSS2-' from 'CLLSS2'.

While Fitch recognizes GLS' extensive experience special servicing large complex loans, particularly Manhattan office properties, the 'CLLSS2-' rating reflects the company's limited internal control environment and potential conflicts of interest as special servicer for SL Green investments, relative to other special servicers.

GLS is a wholly-owned affiliate of SL Green Realty Corp., a real estate investment trust that predominantly acquires, owns, repositions, and manages New York City (and surrounding locations) office properties. The company maintains a highly experienced asset management team comprised of shared employees from SL Green who average 12 years of industry experience.

GLS provides asset management and special servicing predominantly for SL Green's debt and equity investment portfolio. While the company has a regional focus it has also resolved commercial real estate loans secured by all traditional property types in other major metropolitan areas, including San Francisco, Boston, Los Angeles, and Washington, D.C., as well as internationally.

Fitch considers GLS' internal control environment to be less formal than other rated servicers who have dedicated operational compliance and internal audit resources to ensure compliance with servicing agreements and applicable servicing standards. This is somewhat mitigated by ongoing management oversight of workouts and the company's limited workout portfolio. GLS was subject to a Reg AB audit without material finding, as well as Sarbanes Oxley. The company's independent audit firm concluded that the company's internal controls over financial reporting were designed and operating effectively.

To limit potential conflicts of interest, GLS stated that when servicing a CMBS loan in which SL Green holds a position, a separate special servicing team from the investment team is created to provide a firewall and avoid potential conflicts. However, the credit committee contains senior management and servicing individuals, all of whom are employees of SL Green and are integral to the workout process.

As of March 31, 2014, GLS was named the special servicer on four CMBS loans totaling $1.8 billion unpaid principal balance (UPB) and 36 non-CMBS loans totaling $1.5 billion, none of which were in default. SL Green is the B-noteholder on the four CMBS loans.

With the criteria update on Feb. 14, 2014 Fitch has changed the Large Loan Special Servicer designation to Loan Level Special Servicer.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Rating Criteria for U.S. Commercial Mortgage Servicers' (Feb. 14, 2014);

--'Rating Criteria for Structured Finance Servicers' (Jan. 30, 2014).

Applicable Criteria and Related Research:

Rating Criteria for Structured Finance Servicers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=731750

Rating Criteria for U.S. Commercial Mortgage Servicers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=735382

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=849734

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Contacts

Fitch Ratings
Primary Analyst
Howard Miller
Director
+1 212-908-0737
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Adam Fox
Senior Director
+1 212-908-0869
or
Committee Chairperson
Daniel Chambers
Managing Director
+1 212-908-0782
or
Media Relations, New York
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Howard Miller
Director
+1 212-908-0737
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Adam Fox
Senior Director
+1 212-908-0869
or
Committee Chairperson
Daniel Chambers
Managing Director
+1 212-908-0782
or
Media Relations, New York
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com