DBRS Morningstar Publishes Updated Methodology for North American Single-Asset/Single-Borrower Transactions

DBRS Morningstar published an updated version of its “North American Single-Asset/Single-Borrower Ratings Methodology” (the Methodology).

The Methodology clarifies information and metrics that may be used for a comparative review of each transaction to the portfolio or rated transactions. Metrics may include debt service coverage ratio or debt yield levels and information such as historical asset sales or net cash flow performance of comparable properties during periods of economic stress. Potential adjustments resulting from this comparative review could be applied in either a positive or negative direction, with positive adjustments generally not greater than two notches.

Additional updates include a more expansive explanation of property expenses and a clarification that the DBRS Morningstar cap rate may fall outside of the specified ranges, in the infrequent occasions when prevailing market cap rates are sufficiently lower than, or close to, the stated lower or upper cap rate range levels, respectively.

DBRS Morningstar has conducted a periodic review of the Methodology. This update supersedes the previous version published on March 2, 2021, and is effective as of February 28, 2022. DBRS Morningstar deems the update not to be material and has determined that no ratings are expected to change as a result of this update.

Notes:
DBRS Morningstar methodologies are publicly available on its website www.dbrsmorningstar.com under Methodologies & Criteria.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

For more information on this methodology or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].