Big CMBS Play Will Put KeyBank into Top Tier of Servicers

KeyBank Real Estate Capital, the CRE business unit of KeyCorp, has entered into a series of agreements that reportedly will make it the nation’s third-largest named servicer of commercial/multi-family loans, with a commercial mortgage servicing portfolio of about $205 billion.

Marty O’Connor, of of KeyBank Real Estate Capital Loan Servicing and Asset Management

KeyBank Real Estate Capital, the CRE business unit of KeyCorp, Cleveland, has entered into a series of agreements that reportedly will make it the nation’s third-largest named servicer of commercial/multi-family loans, with a commercial mortgage servicing portfolio of about $205 billion, the company announced Thursday.

First, KeyBank has agreed to purchase certain commercial mortgage servicing rights from Bank of America, N.A., which as of the end of March had a total commercial mortgage servicing portfolio of about $110.5 billion. The transaction also includes a CMBS special servicing portfolio of about $14 billion.

KeyBank will purchase substantially all of the third-party CMBS and special servicing rights from Bank of America’s Global Mortgages & Securitized Products business. This portfolio also includes servicing for a variety of private investors, subject to investor consent.

KeyBank stated that it anticipates “a seamless transition and closing of the transactions in the second quarter” and also noted that this transaction does not affect Bank of America’s Commercial Real Estate Banking business.

Simultaneously, KeyBank has entered into a long-term sub-servicing agreement with Berkadia Commercial Mortgage L.L.C., Horsham, Pa., under which Berkadia will act as sub-servicer on all CMBS primary servicing acquired from Bank of America. And in connection with that, KeyBank has agreed to acquire Berkadia’s CMBS special servicing business. 

On a pro forma basis, after both agreements are closed, Key will be named special servicer on approximately $47 billion of CMBS, making it the fifth-largest CMBS special servicer.

Both transactions are, standardly, subject to required consents from certain investors, rating agencies and regulators.

“Acquiring these portfolios allows us to further leverage our highly rated servicing platform,” said Marty O’Connor, executive vice president and head of KeyBank Real Estate Capital Loan Servicing and Asset Management. “Our existing partnership with Berkadia will allow us to quickly integrate the Bank of America portfolios.”

KeyBank Real Estate Capital holds the highest commercial servicer ratings from Morningstar Credit Ratings and S&P as a CMBS master, primary and special servicer.

Although every lender group increased CRE mortgage originations in 2012, the CMBS conduits and banking sectors accelerated the most and gained market share, according to the April 2013 edition of “U.S. Capital Trends: The Big Picture” from Real Capital Analytics.

“The resurgence of CMBS issuance is overshadowing a resurgence of mortgage originations by banks,” the report stated.

The RCA report also noted that private label CMBS issuance of $30 billion so far this year compares to $48 billion in all of 2012. The retail and hotel sectors in particular “have quickly become dependent on CMBS as the primary source of debt capital.”

Finally, the report said, “CMBS financing coupled with growing lending by regional/local banks has helped fuel two significant trends: increased investment activity among private buyers and the increased transaction activity in tertiary markets.”