Fitch Ratings has affirmed Berkadia Commercial Mortgage LLC's (Berkadia) commercial mortgage-backed securities (CMBS) primary servicer rating of 'CPS1-' and master servicer rating of 'CMS2'. Additionally, the special servicer rating of 'CSS1-' was placed on Rating Watch Negative.
The placement of the special servicer rating on Negative Watch reflects Fitch's concerns surrounding the sustainability of the special servicing platform as a result of a 55% decline in the actively special serviced portfolio volume. While Berkadia continues to retain a highly experienced staff of asset managers, Fitch believes the significant decline in portfolio volume and corresponding reduction in asset manager workload raises staffing concerns absent a significant volume of new special servicing assignments.
As of June 30, Berkadia was actively special servicing 82 CMBS assets with an unpaid principal balance of $990.7 million and managing 28 real estate owned (REO) properties totaling $338.5 million. This is a decline from March 31 at which time Berkadia was actively special servicing 166 loans and managing 75 REO assets.
The affirmation of the primary servicer rating reflects Fitch's assessment of the company's strong management team with long company tenure and highly effective quality controls. Fitch remains concerned with Berkadia's aging core servicing system, McCracken Strategy Version 12. While the application, coupled with Berkadia's significant ancillary systems, continues to be adequate to service commercial mortgage loans, it remains the oldest servicing application of all Fitch rated servicers. As technology conversions and or upgrades may be disruptive, costly and long-term, particularly given the number of ancillary systems and complexity of a portfolio conversion, Fitch will continue to focus on Berkadia's technology platform and review the company's timeline for implementation as it progresses.
Affirmation of the master servicer rating reflects Fitch's assessment of the company's highly experienced management team, financial performance, participation within the CMBS market, and a dedicated risk and compliance team that monitors internal controls and operational practices.
The servicer ratings are based on the methodology described in Fitch's reports 'U.S. Commercial Mortgage Servicer Rating Criteria,' dated Feb. 18, 2011, and 'Global Rating Criteria for Structured Finance Servicers' dated Aug. 16, 2010, available on Fitch's web site www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'U.S. Commercial Mortgage Servicer Rating Criteria' Feb. 18, 2011;
--'Global Rating Criteria for Structured Finance Servicers' Aug. 16, 2010.
Applicable Criteria and Related Research:
Global Rating Criteria for Structured Finance Servicers
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547305
U.S. Commercial Mortgage Servicer Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=584005
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