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Commercial Real Estate Methodology

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The real estate industry has become an important component of the GDP of the current markets of IIRA. Because of the cyclical nature of the industry, and the obvious building boom in most centers, the principles described in the methodology are believed to be useful for analysis of the industry as a whole.

IIRA’s rating on real estate pertains to the overall rating of the developer and is not a rating of a particular project unless a specific project rating is requested. The rating is assigned after taking into account market characteristics, the organizational structure and management quality of the developer, and finally assessing each of the projects in the portfolio the developer is executing, thereby arriving at a final credit rating for the developer.

The basic rationale behind the assigned rating would always be an educated forecast of future net free cash flow. The question that needs to be answered is whether the project(s) executed by the developer will be able to generate enough cash flows to meet the commitments that the developer has made to the stakeholders.

The term developer is defined by IIRA as an individual or company promoting the project, sometimes owns the land on which the project is to be constructed, markets the projects, selects the primary contractor (and sometimes subcontractors) and arranges for the institutional financing of the project.


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