Key property, operational and structural features are evaluated when assessing whether a commercial real estate loan can achieve an investment-grade rating in U.S. commercial mortgage-backed securities (CMBS), according to Fitch Ratings in its latest U.S. CMBS weekly newsletter.
Fitch has been presented with potential transactions this year in which low leverage was offset by concerns over sponsorship or property performance, according to Managing Director Eric Rothfeld.
‘Fitch will only consider assigning its highest ratings for loans that have sound property and structural fundamentals in all respects,’ Rothfield says. ‘Conversely, weak property or structural features may preclude Fitch from providing an investment-grade rating, or from potentially rating a transaction altogether.’
Structural weakness that may impact Fitch's ability to rate a loan investment-grade include insufficient property insurance or event risk stemming from an overreliance on a single tenant or industry.
SOURCE: Fitch Ratings