Scope Ratings GmbH (Scope) has today published its updated rating methodology for European Real Estate Corporates. The update provides increased transparency and a detailed presentation of Scope’s analytical approach for assigning credit ratings to real estate corporates. The update does not entail any changes to the essence of Scope’s analytical framework.

The updated methodology can be downloaded here.

The methodology continues to be based on a modular rating approach for issuer ratings comprising an assessment of key rating factors that define a rated entity’s business and financial risk profiles, which is supplemented by supplementary rating drivers.

Summary of the key changes

The methodology contains the following material change:

• Providing guidance on financial policy adjustments in relation to a property company's exposure to interest rate risk;

As well as the following non-material changes:

• Aligning the phrasing of the qualitative assessment of market share with the definitions from Scope’s Credit Rating Definitions;
   
• Providing guidance on dimensions to assess contribution by region from a geographically diversified portfolio;
   
• Definition of capital expenditure for property companies;
   
• Complementing capex coverage with a defined slotting;
   
• Providing guidance on what constitutes a predictable sale of assets;
   
• Providing guidance on the mechanics of the haircuts to be applied to sources of liquidity when assessing an issuer's liquidity profile;
   
• Providing further guidance on mechanics to build a view on minimum annual investments and minimum haircuts on property values (recovery analysis) linked to the carbon intensity of the portfolio;
   
• Providing typical information and data sources used in the analytical process;
   
• Editorial changes.

Rating impact and reviews

The updated methodology is not expected to have an impact on outstanding ratings.

Scope invited market participants to comment on the methodology until 27 April 2025. Scope did not receive comments from market participants during the request-for-comments period. The methodology is now final.