Fitch Updates Criteria Assumptions on Colombian Commercial Real Estate Backed Equity Securitizations
The updated criteria report sets out the Colombia-specific issues addressed in Fitch's analysis of equity securities backed by Colombian CRE. The published criteria assumptions will be utilized in rating new and existing Colombian equity securitizations backed by these assets, on the national scale, which are described in Book 22 of Decree 2555 of 2010 of Colombian federal law. The newly published criteria assumptions are not expected to result in rating actions on existing transactions. Fitch's current portfolio is exclusively rated on the national scale and identified by the '(col)' ratings suffix.
Colombian CRE backed equity securitizations do not commit to the payment of interest or principal. The investors of these transactions are entitled to receive periodically all the net flows derived from a) leases of these properties; and b) financial yields generated from liquidity inside SPV. Additionally, if an asset inside the SPV is sold, investors receive net proceeds of the sale, exposing them to market value appreciation or depreciation of the properties. Ratings address the relative ability to preserve principal and provide a stable return on a scale that is unique to the asset class.
In particular, Fitch's ratings for these issuances are based on an evaluation of several factors, including legal structure; real estate manager quality; asset quality; and pool diversification. All of these aspects are the principal elements that shape the profile of the transaction and, thereby, the determination of a rating opinion on the transaction. The ratings assigned under this criteria are preceded by the letter i.
The criteria report should be viewed together with the master criteria report titled 'Global Structured Finance Rating Criteria' (published in July 2015), for a comprehensive understanding of Fitch's approach to rating Colombian CRE backed equity securitizations.