The proposed updated methodology can be downloaded here.

The proposed update provides increased transparency and a detailed presentation of Scope’s analytical approach for assigning credit ratings to real estate corporates.

The methodology as proposed might have a negative impact of up to two notches on outstanding ratings for a limited number of issuers.

Summary of the proposed key changes

The proposed methodology includes the following adjustments to increase the transparency of the rating process:

• Aligning the industry risk matrix to that of the General Corporate Rating Methodology;
   
• Clarification about the weighing of the business and financial risk profile for different rating categories;
   
• Providing more guidance on how to assess sub-elements of an issuer's competitive position;
   
• Clarification of our approach to assessing the diversification of property developers;
   
• Clarification of our approach to assessing low levels of interest rate hedging and/or relatively short weighted average maturity profiles;
   
• Clarification on how we consider Scope-adjusted debt/EBITDA when assessing the leverage of buy-and-hold business models;
   
• Providing more guidance on how to consider capital intensity in the sector, including related access to finance and capital;
   
• More detail on how we assess liquidity in the sector;
   
• Clarification on how we measure the ESG compliance of an issuer's property portfolio and the associated impact on its issuer and debt ratings;
   
• Providing more detail on how we calculate the unencumbered asset ratio;
   
• Providing three examples to better understand the recovery analysis for non-investment grade issuers; and
   
• Editorial changes

Call for comments

Scope invites issuers, investors and other interested parties to comment on the methodology by 25 February 2024, as part of the agency’s ongoing commitment to transparency and open dialogue with market participants.

Please send your comments to consultation@scoperatings.com.

Scope will review and publish the content of any written response in accordance with regulatory requirements unless the respondent has specifically requested confidentiality.