DBRS Releases CMBS Rating Methodology

Dominion Bond Rating Service (“DBRS”) has today published its approach to rating commercial mortgage-backed securities (“CMBS”). The approach is outlined in DBRS’s CMBS rating methodology, and can be found at www.dbrs.com.

In this publication, DBRS lays out its CMBS rating methodology and the asset-specific analytical procedures to which it adheres and on which investors have relied for years.

DBRS notes that real estate assets have traditionally been viewed as a source of stable cash flow and a long-term hedge against inflation. Although future value can be somewhat variable and markets suffer from intermittent periods of illiquidity, for its part, commercial real estate has proven to be a prudent investment for patient investors.

“Structured finance in general has brought unprecedented liquidity to the commercial mortgage sector,” says Jack Toliver, analyst and report co-author. “CMBS create an extensive array of high credit quality products with call protection and exceptional credit support.”

These CMBS products have enabled fixed-income investors of all shapes and sizes to participate in investments backed by commercial mortgages.

“Because the CMBS market has evolved to a point where structure and creative exit vehicles reduce the level of investor due diligence, more reliance is placed upon rating agency analysis and transparency thereof,” according to Erin Stafford, analyst and another of the report’s authors. “We welcome the challenge of upholding underwriting standards that are proven winners in the continually changing, challenging arena of commercial real estate finance.”