DBRS Publishes Market Rank and Market Index Commentary

DBRS, Inc. has today issued a commentary explaining the DBRS Market Index and Market Rank for the United States and Canada.

DBRS recognizes that in times of economic stress, real estate capital availability contracts and may limit investment to more highly populated markets with greater liquidity and comparatively higher transparency. Defaulted loans in tertiary or rural markets will experience significantly higher losses because of a limited investor base and market inefficiencies. As such, market consideration is a factor in determining both probability of default and loss severity given default in DBRS modeling.

DBRS recognizes market liquidity by giving credit to loans that are located in dense urban locations and penalizing loans on a sliding scale as their markets become more sparsely populated, rural and/or illiquid. Differentiating between downtown urban core and the fringe can be difficult; therefore, DBRS has developed the DBRS Market Index for the United States and Canada, which can be found in the DBRS CMBS reporting platform IReports, at www.ireports.dbrs.com.

DBRS Market Rank incorporates population, economic data and CMBS origination activity, as well as market density within a given zip/postal code. The higher the Market Rank, the better the observed liquidity in the respective CRE market.

DBRS’s seven categories for its Market Rank translate into inputs in the DBRS CMBS model, to address the fact that loss severity is higher in tertiary and rural markets (Market Rank 1 or 2) as compared to primary urban markets (Market Rank 6 or 7). Historical data generally supports this thesis that loss severity increases in tertiary and rural markets.

Notes:
A copy of this commentary is available by contacting us at info@dbrs.com.

For more information on this credit or this industry, visit www.dbrs.com or contact us at info@dbrs.com.