Commercial Real Estate Scorecard
Assess Commercial Real Estate Portfolio Risk
Commercial real estate (CRE) exposures represent a large share of credit portfolios for many financial institutions, including banks, insurance companies, and asset managers.
For these institutions, the risk that borrowers fail to pay either the interest and/or principal on these CRE loans poses a significant challenge, as significant credit loss from commercial mortgages can wipe out capital cushions. Given these challenges, credit risk management of CRE exposures is critical.
The CREST Scorecard provides a granular, objective, consistent and transparent framework for the measurement and assessment of loan credit risk, helping to meet regulatory needs around internal risk rating systems and model risk management. It facilitates multiple business applications, including loan origination and surveillance, credit pricing, and portfolio management.
Key Features
Comprehensive Coverage of Commercial Real Estate Lending
Includes coverage of acquisition, development and construction financing, transitional, and income-producing real estate across property types, financing structures, and geographic.
Outputs (Credit Scores) Mapped to S&P Global Market Intelligence PD and LGD Rates and Broadly Align with Credit Ratings Issued by S&P Global Ratings
The Scorecard links empirical default and recovery rates to key explanatory variables at both the property/loan level and market level.
CREST Enhances Consistency and Transparency of Internal Rating Systems and Facilitates Validation of Scorecard Use
Analytical transparency of the methodology is supported by granular scoring criteria and extensive user and technical documentation.
Facilitates Multiple Business Applications and Helps Meet Regulatory Needs
CREST outcomes are used for estimation of expected credit losses within loan origination and surveillance, credit pricing and portfolio management, or as key inputs for CECL estimation.
Commercial Real Estate Scoring Tool (CREST) Scorecard
The CREST Scorecard leverages the analytical process of S&P Global Ratings commercial real estate property evaluation to determine an overall CRE risk score, which is ultimately mapped to historical default and recovery data dating back to 1981.
The CREST Scorecard framework is established upon the broad factors that can affect the likelihood of default and recovery of a CRE loan, including the following:
- Construction Risk
- Market Risk
- Property Valuation & Environment Risk
- Financial Risk
- Sponsor/Guarantor Support and/or Structural Protection
The LGD is estimated within the same framework, relying upon the property and market characteristics and Loan-to-Value (LTV), among other factors.
Commercial Real Estate Insights
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Our Commercial Real Estate Scoring Tool (CREST) Scorecard offers a single-source solution for CRE loan credit risk needs which consolidates Probability of Default (PD) and Loss Given Default (LGD) scoring for multiple property types. Complete the form to request more information.