Martin Zorn - Chief Administrative Officer, Kamakura Corporation
Kamakura Corporation reported Monday it will launch a suite of commercial real estate default probability models based in part on data furnished by Trepp’s Data Feed, which integrates the best of various information sources to provide a single supply of high quality data regarding property types, tenant and market information on a daily basis. Kamakura Risk Information Services already distributes default probabilities for public firms, non-public firms, and sovereigns. The Kamakura commercial real estate default models represent another major expansion in KRIS coverage to the commercial real estate asset class, with total commercial real estate loans outstanding in the United States estimated at over $3.2 trillion and globally at over $7 trillion.
In addition to the Kamakura CRE Default Models, Kamakura announced that Kamakura Risk Manager Version 8.0, to be released in February, will have full automated access to the Trepp CMBS Engine. The Trepp libraries provide the most comprehensive, industry standard CMBS models in the market. The flexibility of the Trepp Engine, which will be called from within Kamakura Risk Manager, also accommodates the unique nuances of commercial real estate analysis and stress testing. The design allows for a range of vector or logic-based scenario assumptions at the individual loan, group, and pool levels for CMBS transactions, with call-back capabilities to employ Kamakura’s proprietary default and prepayment models.
Martin Zorn, Chief Administrative Officer for Kamakura Corporation, said Monday, “Measuring the impact of commercial real estate price movements on loan default risk and CMBS tranche risk is not just best practice in risk management but is at the very heart of the Comprehensive Capital Assessment and Review 2012 (‘CCAR 2012’) announced by U.S. bank regulators in November. Commercial real estate risk management is a major focus for bank and insurance regulators around the world. This alliance with Trepp enables Kamakura to bring the best commercial real estate information and analytics to clients in the context of transaction level enterprise wide risk management.”
The Kamakura CRE default probability models contain separate default probability models for three separate data environments. The first sub-model is focused on transactions where the bulk of data available is concerned with the attributes of the loan itself. The second sub-model is derived from a data base that contains not only the attributes of the commercial real estate loan itself but also the attributes of the building being financed. The third sub-model is based on the same data as the second with the addition of information on the major tenants in the building. KRIS public firm and non-public firm default probabilities allow all three of the Kamakura CRE models to achieve unprecedented accuracy. At the same time, the models explicitly link to the CCAR 2012 macro-economic variables and other market sensitive explanatory variables for maximum accuracy in stress testing and credit adjusted value at risk calculations.
