CLEVELAND — KeyBank Real Estate Capital, the commercial real estate business unit of KeyCorp (NYSE: KEY), has entered into a series of agreements that will substantially increase its commercial mortgage servicing business.
KeyBank has agreed to purchase certain commercial mortgage servicing rights from Bank of America under a pact with Bank of America, N.A. As of March 31, Bank of America’s commercial mortgage servicing portfolio totaled approximately $110.5 billion. This transaction also includes a CMBS special servicing portfolio of about $14 billion. The transaction price was not disclosed.
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 and is subject to investor consent. The transaction, which is expected to close in the second quarter, does not impact Bank of America's commercial real estate banking business.
Upon completion of this deal, KeyBank’s commercial mortgage servicing portfolio will be among the top three largest named servicers of commercial and multifamily loans in the U.S., with a servicing portfolio of approximately $205 billion.
Simultaneously, KeyBank has entered into a long-term sub-servicing agreement with Berkadia Commercial Mortgage LLC. Under this agreement, Berkadia will act as sub-servicer on all CMBS primary servicing acquired from Bank of America. In connection with this agreement, KeyBank has also agreed to acquire Berkadia's CMBS special servicing business.
On a pro forma basis, after closing the agreements with Bank of America and Berkadia, KeyBank will be named special servicer on approximately $47 billion of CMBS, making it the fifth-largest CMBS special servicer.
Completion of the agreements with Bank of America and Berkadia are subject to obtaining any required consents from certain investors, rating agencies and regulators.
“This acquisition helps to ensure that Key is well-positioned for growth and represents our willingness to invest in our corporate bank business,” says Beth Mooney, chairman and CEO of Cleveland-based KeyCorp.
“Acquiring these portfolios allows us to further leverage our highly rated servicing platform,” adds 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 LLC and S&P as a CMBS master, primary and special servicer. The business unit provides construction and interim finance, permanent mortgage and commercial real estate loan servicing, as well as investment banking and cash management services for virtually all property types. As a Fannie Mae Delegated Underwriter and Servicer and Freddie Mac Program Plus Seller/Servicer, KeyBank Real Estate Capital offers a variety of agency financing solutions for multifamily properties, including seniors housing and student housing.
KeyBanc Capital Markets acted as financial advisor to KeyBank in the acquisition.
KeyCorp’s stock price closed on Thursday, May 9 at $10.29 per share, up from trading at $7.89 per share this time last year.