The Hyperion Brookfield High Yield CMBS investment process involves rigorous analysis of not only CMBS relative value considerations, but of each individual property that collateralizes the deal. The emphasis is on disciplined loan level /property type due diligence and surveillance, as well as reviews of the bond structures. Property inspections are performed on the larger assets in the pool of loans and the deal's complete loan file is scrutinized. The creditworthiness of the borrower and tenants in the collateral properties is also analyzed as part of our due diligence. Before a High Yield CMBS issue is purchased, we use our proprietary credit and shortfall model to simulate a stressed scenario for the deal (e.g., lower rents, declining property values), in order to calculate a return after expected losses. Our analytical capabilities allow us to reflect our geographic, property-type and vintage biases in our investment process. After a CMBS issue is purchased for a client, we maintain surveillance on the deal's credit performance with the same level of due diligence employed in the purchase decision.
A continuous assessment of portfolio holdings, ultimately resulting in estimated losses as a percent of subordination relative to the credit class in question, drives a strict buy/hold/sell process. Our proprietary short fall model and loan / deal scoring systems are an integral part of the risk surveillance process. Tenant credit also plays a significant role in commercial mortgage performance and credit reviews prepared by Hyperion Brookfield’s corporate credit analysts are a considerable component of the loan review process.