Scope Ratings is calling for comments on its updated European Real Estate Rating Methodology until 4 January 2022.

Download the proposed methodology here.

The updated methodology includes the following adjustments:

• Further split of the development sub-segment into commercial and residential due to the lower substitution risk for the latter
• Guidance on the industry risk of community service properties, which Scope considers similar to that of residential properties
• Extended guidance on the assessment of business risk and financial risk profiles, including in the ‘A’, ‘AA and above’, ‘B’ and ‘CCC and below’ categories
• Recalibration of thresholds for the market share assessment based on gross lettable area and the number of apartments to allow for a more equal treatment between the commercial and residential sub-segments
• Alignment of the thresholds and general definitions for pre-letting rates (develop-to-hold) to those for occupancy rates (buy-and-hold), as assets in the development phase will eventually form part of the issuer's operational real estate portfolio
• Replacement of the return on assets profitability measure with the development backlog to provide a better view on the stability of future revenues and profitability
• Alignment of interest cover thresholds to those of real estate developers (commercial and residential) under Scope’s Corporate Rating Methodology.
• Renaming of different levels as regards tenants’ credit quality
• Minor editorial changes

Scope invites issuers, investors and other interested parties to comment on the methodology by 4 January 2022 as part of the agency’s ongoing commitment to transparency and an open dialogue with market participants.

Please send your comments to consultation@scoperatings.com.

Scope will review and publish the content of written responses in accordance with regulatory requirements unless the respondent has explicitly requested confidentiality and will publish the final version of the methodology thereafter.