A property investor purchased a retail property in London with a market value of £250.0 million. The property is multi-tenanted. The purchase is financed with a £170.0 million “5-year loan” with an annual debt service due of £9.0 million that includes a £3.4 million annual amortisation. The net average annual cash flow of the investor is £14.85 million. You are a rating analyst and being asked to estimate the following: a) Estimate the Debt Service Coverage Ratio (DSCR). b) Based on your estimate of the DSCR and a diversity score of 5: i) Estimate the Tenant’s Contribution (TC) to the DSCR. ii) What is the Term default risk rating equivalent? c) As a rating analyst, you haircut the market value of the property by 10.0%. Based on this haircut: i) Estimate the Haircut property value and Haircut Loan-to-Value (LTV) ratio. ii) Estimate the Refinancing Haircut LTV ratio. Table 1 provides the mapping of different DSCRs to the Term default risk rating equivalent. Refer to the image attached below for Table 1
A property investor purchased a retail property in London with a market value of £250.0 million. The property is multi-tenanted. The purchase is financed with a £170.0 million “5-year loan” with an annual debt service due of £9.0 million that includes a £3.4 million annual amortisation. The net average annual cash flow of the investor is £14.85 million.
You are a rating analyst and being asked to estimate the following:
a) Estimate the Debt Service Coverage Ratio (DSCR).
b) Based on your estimate of the DSCR and a diversity score of 5:
i) Estimate the Tenant’s Contribution (TC) to the DSCR.
ii) What is the Term default risk rating equivalent?
c) As a rating analyst, you haircut the market value of the property by 10.0%. Based on this haircut:
i) Estimate the Haircut property value and Haircut Loan-to-Value (LTV) ratio.
ii) Estimate the Refinancing Haircut LTV ratio.
Table 1 provides the mapping of different DSCRs to the Term default risk rating equivalent.
Refer to the image attached below for Table 1
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