Rating-Agency PCA Criteria for Securitised Loans: What CMBS Reviewers Expect in a Property Condition Report

When a commercial loan is destined for a securitised pool, the property condition report is written not only for the originating lender but for the rating agency that will review the pool. The agencies publish criteria describing what they expect a PCA to contain, and conduit lenders pass those expectations to consultants as engagement requirements.

What the criteria address

Rating-agency PCA criteria describe the scope of the assessment (consistent with ASTM E2018), the qualifications of the consultant, the systems to be addressed, the treatment of immediate repairs and deferred maintenance, the replacement-reserve analysis and its horizon, the treatment of code and life-safety items, and the reliance language. They are written for the agency's own analysts and are public.

How they change the report

• Reserve horizon. Conduit engagements commonly specify a twelve-year reserve table rather than ten, with reserves normalised per square foot or per unit for the pool-level analysis.
• Immediate repairs. Scrutinised closely because they are escrowed at closing, often above 100 percent of the opinion of cost, and must be completed within a set period. Each immediate item should state which E2018 test it meets.
• Roof, paving and HVAC. Remaining lives on the three systems that dominate most reserves are read line by line; the basis for each RUL should be explicit.
• Reliance. The reliance letter names the originator, the depositor and the trustee, and often successors and assigns for the securitisation parties.
• Consultant qualifications and insurance are stated in the report or its exhibits.
• Consistency between the summary, the tables and the narrative, since the analyst reads the summary and tables and samples the narrative.

What does not change

The standard is still E2018; the report structure, the source attribution, the threshold and the segregated tables are the same. The criteria add emphasis and a longer horizon, not a new format. See what lenders want.

Baseline PCR's evaluation period is set per job (twelve years for a conduit engagement), the reserve table normalises per square foot, every RUL line prints its basis, and the reliance language is in the limiting conditions with a reliance-letter draft in the delivery panel. The sample report shows a ten-year example; the same report at twelve years is one setting.