Fitch Affirms LNR's Special Servicer Rating for Commercial Real Estate Loans

NEW YORK--()--Fitch Ratings has affirmed the commercial loan special servicer rating of LNR Partners, LLC's (LNR) at 'CSS1-'.

The affirmation of the rating reflects LNR's long history of special servicing commercial real estate loans, experience and tenure of the management team and staff, commitment to technology, adequate policies and procedures, and a well-established multi-tiered internal control environment.

LNR is an indirect wholly owned subsidiary of Starwood Property Trust, Inc. (STWD) and the largest CMBS special servicer by active loan count and balance. The company's active special servicing portfolio, which includes 152 CMBS transactions, is predominately legacy CMBS. However, through partnerships with third-party investors, LNR is an active investor in recent vintage CMBS and the named special servicer for 30 new-issue CMBS transactions issued since 2012 as of year-end 2014.

Employee turnover, which was elevated in 2013 and noted as a prior concern, normalized to an aggregate of 13% as of year-end 2014. In addition, Fitch noted improved results in LNR's internal audits in 2014, which did not contain any finding Fitch deemed material, as well as improvement in financial statement collection and reporting for specially serviced assets. Fitch also reviewed LNR's aging real estate owned (REO) inventory of 477 properties as of year-end 2014 which have been held as REO for an average of 17 months. Fitch noted that several of the assets had been recently sold, had sales pending, or were soon to be marketed for sale. While LNR's asset managers presented reasonable 'value add' strategies for large assets, Fitch will continue to closely monitor REO hold times of all special servicers to ensure asset dispositions are timely and consistent with the highest standards of overall servicing ability.

As of Dec. 31, 2014, LNR was named special servicer for 10,459 commercial mortgage loans with an unpaid principal balance of $135 billion. LNR resolved more loans than were transferred to special servicing in 2014 despite the transfer of 337 loans totaling $4.4 billion throughout the year. The company's active special servicing portfolio declined to 972 loans totaling $12.7 billion as of year-end 2014 from 1,150 loans totaling $14.8 billion the prior year, consistent with the declining volume of specially serviced loans across Fitch-rated special servicers.

The servicer rating is based on the methodology described in Fitch's reports 'Rating Criteria for U.S. Commercial Mortgage Servicers' dated Feb. 14, 2014, and 'Rating Criteria for Structured Finance Servicers' dated Jan. 30, 2014, available on Fitch's website www.fitchratings.com.

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 U.S. Commercial Mortgage Servicers

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

Rating Criteria for Structured Finance Servicers

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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=982911

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Contacts

Fitch Ratings
Primary Analyst
Adam Fox
Senior Director
+1-212-908-0869
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
James Bauer
+1-212-908-0343
or
Committee Chairperson
Mary MacNeill
Managing Director
+1-212-908-0785
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Adam Fox
Senior Director
+1-212-908-0869
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
James Bauer
+1-212-908-0343
or
Committee Chairperson
Mary MacNeill
Managing Director
+1-212-908-0785
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
sandro.scenga@fitchratings.com