LNR Partners LLC Commercial Mortgage Loan Special Servicer Ranking Affirmed

  • We affirmed our overall ranking on LNR Partners LLC at STRONG as a commercial mortgage loan special servicer.
  • LNR, headquartered in Miami Beach, Fla., is a market leader in both CMBS and commercial real estate special servicing and debt investing. The firm is a subsidiary of Starwood Property Trust Inc. (SPT), a publicly traded commercial mortgage REIT that focuses on originating and investing in commercial mortgage loans and other commercial real estate-related debt investments.
  • The outlook is stable.
NEW YORK (S&P Global Ratings) Feb. 5, 2019--S&P Global Ratings today affirmed 
its STRONG ranking on LNR Partners LLC (LNR) as a commercial mortgage loan 
special servicer. The outlook is stable.

Our ranking reflects LNR's:
  • Experienced and tenured senior managers and asset management staff, albeit with a higher asset per asset manager ratio than peers', accompanied by a well-defined organizational structure;
  • Well-automated technology systems that include a proprietary asset management system supporting its platform, allowing for efficient leveraging of its operations;
  • Effective internal controls, including well-detailed policies and procedures for special servicing operations and a high degree of workflow and process automation for asset management activities;
  • A highly effective and well-regarded analyst training program;
  • Demonstrated ability to successfully resolve a high volume of defaulted CMBS loans and manage real estate-owned (REO) assets of all levels of complexity, albeit with lengthier REO hold periods than those of its peers.
Since our prior review, the below changes and/or developments have occurred 
(see "Servicer Evaluation: LNR Partners LLC," published Aug. 30, 2017): 
  • Loan resolution activity reduced LNR's active specially serviced loan portfolio to $4.0 billion and 190 loans as of June 30, 2018, from $5.5 billion and 295 loans as of Dec. 31, 2016.
  • REO liquidation activity reduced the unpaid principal balance (UPB) of active REO inventory to $4.9 billion from $5.6 billion, with the average age of the REO inventory declining since original transfer to special servicing, to 38 months from 42 months.
  • Although LNR increased its named special servicing portfolio to 167 CMBS/Freddie Mac K-series securitized transactions from 153, the underlying collateral declined to 5,804 loans with a UPB of $76 billion (as of June 30, 2018) from 6,246 loans with a UPB of $87.7 billion (as of Dec. 31, 2016).
  • Management eliminated 24 staff, including two team leaders and a senior vice president, during the first half of 2018 to align its workforce with existing and anticipated volume declines during 2018 and 2019.
  • Following the retirement of LNR's long-tenured legal counsel, the head of the surveillance department is now responsible for tracking staff training participation, which remains a manual process.
The outlook for the ranking is stable. The organization has a long history of 
real estate investment and commercial mortgage servicing experience, and it 
continues to seek efficiencies in its operations. We expect LNR to continue to 
invest in the systems and other resources necessary to manage its portfolio in 
accordance with industry standards, as well as its current ranking.
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