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You are here: Home » Resources » Articles » Remedial Cost Estimates as a Critical Component of Securing CMBS Loans

June 10, 2019

Remedial Cost Estimates as a Critical Component of Securing CMBS Loans

By Jenny Redlin, REPA

QUANTIFICATION OF ENVIRONMENTAL RISK IMPROVES RATINGS ACCURACY

We have co-authored an article for the summer edition of CRE Finance World about the importance of remedial cost estimates as a quantitative framework for assessing environmental risk tranches. This is particularly important for securing CMBS loans, which rely on ratings agency asset valuation for investment grade bonds. There has been an increase in the number of CMBS deals forgoing a Phase II ESA in lieu of alternative options such as a holdback or environmental insurance. A remedial cost estimate allows all stakeholders to better assess the potential risk scenarios of environmental contamination on a site, and streamline the securitization process through reduced subjectivity.

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