OREANDA-NEWS. May 13, 2016. Fitch Ratings has affirmed the commercial loan special servicer rating of LNR Partners, LLC's (LNR) at 'CSS1-'.

The affirmation 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 of 159 CMBS transactions is comprised of legacy CMBS transactions (70% by count) and recent vintage transactions issued in 2011 or later (30%).

Asset manager turnover was 32% in 2015, an increase from 24% the prior year, which Fitch attributes to the growing demand for asset managers in the Miami market, as well as active recruitment from commercial mortgage originators and issuers outside of Miami as well as the declining balance of loans in special servicing. While turnover was elevated among asset managers, LNR continues to maintain a deep bench with 43 asset managers that average 14 years of industry experience and eight years of company tenure.

For 2016 special servicer reviews, Fitch is focused on aged specially serviced loans, noting another consecutive year of increased aging. During its servicer reviews, analysts are discussing real estate owned (REO) assets with asset managers and senior management to better understand workout plans. Fitch questions the feasibility of certain long term workout plans given current market conditions, potential motivations for not disposing of assets, and historically higher losses on protracted resolutions, and will address its finding following its 2016 reviews. Notwithstanding a reduction in REO assets of 25% from year-end 2014 to 2015, LNR's 359 REO loans, the largest REO portfolio of Fitch rated special servicers, aging has increased to 22 months in 2015, from 17 and 12 in 2014 and 2013 respectively.

In 2015, the company's named special servicing portfolio experienced only a modest decline as recent vintage special servicing assignments, acquired through partnerships with non-affiliate investors, has offset loan maturities in legacy CMBS; however, given in excess of \\$40 billion is expected to mature in 2016 and 2017, Fitch expect LNR's named special servicing to decline.

As of Dec. 31, 2015, LNR was named special servicer for 8,162 commercial mortgage loans with an unpaid principal balance of \\$112 billion. The company's active special servicing portfolio declined to 662 loans totaling \\$9.8 billion as of year-end 2015 from 821 loans totaling \\$12.6 billion the prior year, consistent with the declining volume of specially serviced loans across Fitch-rated special servicers. Approximately 54% of LNR's active special servicing portfolio is made up of REO assets representing \\$5.1 billion in outstanding balance.

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 April 30, 2015, available on Fitch's website www.fitchratings.com.