Servicer Evaluation: KeyBank Real Estate Capital Servicer Evaluation: KeyBank Real Estate Capital...

download Servicer Evaluation: KeyBank Real Estate Capital Servicer Evaluation: KeyBank Real Estate Capital Opinion

of 19

  • date post

    09-Jun-2020
  • Category

    Documents

  • view

    2
  • download

    0

Embed Size (px)

Transcript of Servicer Evaluation: KeyBank Real Estate Capital Servicer Evaluation: KeyBank Real Estate Capital...

  • Servicer Evaluation: KeyBank Real Estate Capital Servicer Analysts: Mark I Goldberg, New York (1) 212-438-7779; mark_goldberg@standardandpoors.com Mary Chamberlain, New York 212-438-3034; mary_chamberlain@standardandpoors.com

    Table Of Contents

    Opinion

    Outlook

    Company Profile

    Management and Organization

    CDO-CRE Special Servicing

    Servicing Administration - Overview

    Loan Administration – Primary Servicing

    Loan Administration - Master Servicing

    Loan Administration - Special Servicing

    Financial Position

    Contact Information

    February 9, 2009

    www.standardandpoors.com/ratingsdirect 1

    Standard & Poor's. All rights reserved. No reprint or dissemination without S&P's permission. See Terms of Use/Disclaimer on the last page.

    701374 | 301001911

  • Servicer Evaluation: KeyBank Real Estate Capital

    Opinion

    The rankings for commercial primary, master, and special servicing for KeyBank Real Estate Capital (KBREC) are

    affirmed at STRONG.

    KBREC continues to demonstrate sound and efficient servicing operations across all ranking categories and criteria.

    KBREC acquired the primary and master servicing operations of ORIX in 2005 and integrated servicing operations

    across two locations (Kansas City, Mo. and Dallas) during 2006 and 2007. However, current economic conditions

    gave way to driving greater economies of scale from one location. As such, the company consolidated all servicing

    activities in Kansas City. KBREC did, however, retain a small number of staff at the Dallas location, but relocated

    some employees to Kansas City. Nevertheless, the company has maintained a tenured and experienced staff for all

    servicing functions, a sound audit regime (including quality-control monitoring), and dedicated surveillance of

    investor portfolios.

    Outlook

    Stable. KBREC has diverse lines of business, providing interim and long-term financing for a full array of investors

    (CMBS, government-sponsored enterprises [GSEs], life companies, other third-party investors, and bank loans). The

    company continues to focus on borrower and investor relationships and on maintaining superior portfolio

    performance. The company has demonstrated commendable growth in its primary and master servicing portfolio

    over the past several years, although it showed signs of run-off and reduced lending in 2008. Special servicing

    activity increased during the first half of 2008 for both CMBS and non-CMBS problem assets, and, as is the case

    with many of Standard & Poor's special servicers, KBREC anticipates increasing staff in special servicing during

    2009.

    Table 1

    Servicing Portfolio

    Jun-08 Dec-07 Dec-06 Dec-05 Dec-04

    UPB (Mil.$)

    Loans (No.)

    UPB (Mil.$)

    Loans (No.)

    UPB (Mil.$)

    Loans (No.)

    UPB (Mil.$)

    Loans (No.)

    UPB (Mil.$)

    Loans (No.)

    Primary 123,490 11,511 134,440 11,475 95,407 11,331 54,711 7,525 31,935 5,056

    Master (SBO*) 14,224 1,744 14,582 1,912 10,074 1,814 4,448 496 2,159 289

    Total Servicing 137,714 13,255 149,022 13,387 105,481 13,145 59,159 8,021 34,094 5,345

    Avg. Loan Size 10.4 11.1 8.0 7.4 6.4

    Special Servicing

    262 10 7 2 43 7 14 5 149 15

    Avg Asset Size 26 4 6 3 10

    *SBO--Serviced by others.

    Standard & Poor’s RatingsDirect | February 9, 2009 2

    Standard & Poor's. All rights reserved. No reprint or dissemination without S&P's permission. See Terms of Use/Disclaimer on the last page. 701374 | 301001911

  • Company Profile

    KBREC is a business unit of KeyBank USA N.A. (KeyBank), a wholly owned subsidiary of KeyCorp. The

    organization provides financing for construction, permanent, bridge, and mezzanine commercial real estate loans

    and services the full range of investors: capital markets (CMBS), institutional investors, pension funds, life

    companies, banks, and GSEs. KBREC has more than 30 field origination offices, and servicing operations are based

    in Kansas City.

    Management and Organization

    The ranking for management and organization is affirmed at STRONG.

    Staffing Depth and Organizational Effectiveness

    KBREC provides origination and servicing activities for all types of commercial real estate transactions from

    construction and bridge financing to permanent loans across the entire capital stack, including mezzanine and equity

    positions. The organization is broadly structured along three main branches: origination, servicing, and technology.

    The servicing staff has strong backgrounds in commercial real estate as indicated by average years of experience at

    the company and within the industry. Further, special servicing asset managers have 13 years average workout

    experience and five years experience with KBREC.

    Table 2

    Industry Experience / Company Tenure*

    Senior Managers Middle Managers Staff

    Experience Tenure Experience Tenure Experience Tenure

    Primary/Master 23 12 17 9 11 5

    Special 19 11 29 4 5 4

    *As of June 1, 2008.

    Total servicing staff as of June 2008 totaled approximately 300 positions, which included a few staff located at the

    Dallas servicing platform acquired from ORIX in fourth-quarter 2005. As mentioned, KBREC recently announced it

    was reorganizing its overall operations, consolidating and reducing origination regional offices and the Dallas

    servicing location in response to the downturn in the real estate and capital markets. However, certain selected

    activities will be maintained in Dallas (and consolidated with an originations office in that city) that include

    servicing of the Government National Mortgage Assn. (Ginnie Mae) and HUD/Federal Housing Administration

    portfolios, a portion of the IT staff, and business development activities. The Dallas staffing reductions took place

    during the second half of 2008 in a phased approach that was well-planned and effectively managed with internal

    control testing to ensure there was no disruption to customers or servicing activities.

    Marty O'Connor heads the KeyBank and KBREC's Real Estate Servicing & Support Group, which includes

    origination risk management, compliance, servicing, and technology associated with the commercial real estate

    business. Bryan Nitcher, reporting to Marty O'Connor, heads the Loan Servicing and Asset Management/Special

    Servicing operations.

    www.standardandpoors.com/ratingsdirect 3

    Standard & Poor's. All rights reserved. No reprint or dissemination without S&P's permission. See Terms of Use/Disclaimer on the last page. 701374 | 301001911

    Servicer Evaluation: KeyBank Real Estate Capital

  • The account management section handles new loan setups and conversions, while investor reporting and operations

    covers all recurring daily activities (payments, disbursements, and remittance).

    Training

    Training and compliance has been recentralized to Kansas City from its previous dual location delivery between

    Kansas City and Dallas.

    • Targeted annual training time of 40 hours was ahead of schedule with 26 hours completed as of June 2008. • An on-the-job mentoring program and external education courses supplement formal classroom courses. • Training classes include presentations and discussions by internal and external subject matter experts, including

    attorneys, appraisers, building inspectors, engineers, and senior staff.

    • KeyCorp's human resource and central training departments provided strong support and assistance in the development of formal programs, which resulted in a uniform and integrated curriculum.

    • KBREC enhanced and replaced its previous web-based training (Training Employee Development System-TEDS) with a new web-based application–My Learning Center–that continues to provide access to schedules, courses,

    and computer-based training modules, facilitate online registration, managerial approval, and tracking of

    completed programs and is more specific to each employee's job function and requirements.

    • "Hot Topic" one-hour sessions provide an informal setting for discussions about current issues, procedures, and regulations, including postmortem case reviews, from department managers and subject matter experts (SMEs).

    • Completed programs are incorporated as part of employee annual performance reviews, including recommendations for the succeeding year.

    • Overall, KBREC's structure and staffing has been well-managed with appropriate experience levels, training, and education. KBREC has its own homepage on the corporation's KeyNet intranet site, RECWeb, which provides

    Standard & Poor’s RatingsDirect | February 9, 2009 4

    Standard & Poor's. All rights reserved. No reprint or dissemination without S&P's permission. See Terms of Use/Disclaimer on the last page. 701374 | 301001911

    Servicer Evaluation: KeyBank Real Estate Capital

  • new employee guides, curriculum-based positions, a training library, and other documentation regarding training

    requirements.

    Technology

    A proprietary and extensive data warehouse application ensures a well-automated and integrated data management

    operation and reporting capabilities, and supplements the Strategy servicing system. KBREC adopted the best

    features of two pla