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KeyBank Real Estate Capital STRONG Rankings Affirmed; Outlooks Are Stable

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KeyBank Real Estate Capital STRONG Rankings Affirmed; Outlooks Are Stable

Overview

  • KeyBank Real Estate Capital is a full-service capital provider and mortgage loan servicer, which is a business unit of KeyBank N.A., a wholly owned subsidiary of Cleveland-based KeyCorp, a U.S. commercial bank. Servicing operations are primarily based in Overland Park, Kan., through its loan servicing and asset management division.
  • We affirmed our overall STRONG rankings on KeyBank Real Estate Capital as a commercial mortgage loan primary, master, and special servicer.
  • The ranking outlooks are stable.

NEW YORK (S&P Global Ratings) Nov. 20, 2023--S&P Global Ratings today affirmed its STRONG rankings on KeyBank Real Estate Capital (KBREC) as a commercial mortgage loan primary, master, and special servicer. The ranking outlook is stable for all rankings.

Our rankings reflect KBREC's:

  • Seasoned and tenured senior management team;
  • Strong audit, compliance, and control environment;
  • Highly effective technology systems and applications;
  • Well-defined training regime;
  • Substantial track record and institutional commitment to the servicing platform as evidenced by its Mortgage Bankers Assn. (MBA) December 2022 rankings as the third-largest primary and master servicer, including its second-ranked market position as a Freddie Mac capital markets execution (CME) primary and master servicer, and its top-three market position in commercial mortgage-backed security (CMBS) primary and master servicing, as measured by unpaid principal balance (UPB);
  • Market position per the MBA as the third-largest named special servicer as measured by UPB; and
  • Diverse property types in its primary and master servicing portfolio, accompanied by strong geographic and investor diversity.

Since our prior review (see "Surveillance: KeyBank Real Estate Capital," published Feb. 10, 2022) the following changes and/or developments have occurred:

  • The executive vice president (EVP), who heads up the servicing team, announced he will be retiring in March 2024 following a 23-year career with KBREC. He will be succeeded internally by the senior vice president (SVP), who is currently the head of special servicing and transactions and has served in various roles during his 17-year tenure with KBREC.
  • The SVP of finance retired in March 2023 and was replaced by an internal candidate with 21 years of tenure within the company.
  • The vice president (VP) of risk management retired in March 2023 and was replaced by an employee with 22 years of company tenure and extensive experience in risk management.
  • KBREC enhanced its website's interface to frontline users, added the ability of investor document upload, and created an escalation process for issues noted within the website.
  • KBREC upgraded its McCracken Strategy servicing system to version 20 in July 2023 from version 19F.
  • KBREC's primary and master servicing portfolio grew 30.8%, to $458.1 billion from $350.3 billion. This growth was largely fueled by growth among its other third-party investor (103.2%) and CMBS (29.1%) investor clients.
  • Actively special-serviced assets increased to $4.7 billion (206 assets: 194 loans and 12 real estate owned [REO] assets) from $2.6 billion (189 assets: 176 loans and 13 REO assets) as the average active loan UPB doubled, increasing to $23.3 million from $12.1 million.
  • As of mid-year 2023, KBREC was the named special servicer on 385 transactions (up from 332), aggregating $198.6 billion in UPB (up from $163.8 billion): CMBS transactions increased to 178 from 158, aggregating $84.2 billion in UPB (up from $60.7 billion); Freddie Mac CME securitizations increased to 193 from 168, aggregating $106.3 billion in UPB (up from $100.5 billion); and there were 14 commercial real estate collateralized debt obligations, aggregating $8.1 billion in UPB (up from $2.6 billion).

The ranking outlook for all three rankings is stable. We believe that KBREC will seamlessly manage the transition in leadership in early 2024 and continue to perform as a highly effective commercial mortgage primary, master, and special servicer of its diverse portfolio.

The financial position is SUFFICIENT.

Related Research

This release/report does not constitute a rating action.

Servicer Analyst:Steven Altman, New York + 1 (212) 438 5042;
steven.altman@spglobal.com
Secondary Contact:Benjamin Griffis, Englewood + 1 (303) 721 4672;
benjamin.griffis@spglobal.com
Analytical Manager:Robert J Radziul, New York + 1 (212) 438 1051;
robert.radziul@spglobal.com

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