Document ID: chunk:federal_register_of_legislation:F2024L01073:front:0:p12
Version: federal_register_of_legislation:F2024L01073
Segment Type: other
Provision Reference: 
Character Range: 30815–33991

consequently must be classified as a non-standard loan, may be reclassified as a standard loan where the loan has been performing consecutively for the previous 36 months.

Commercial property
 1.          A commercial property exposure is a property exposure that is not a residential property exposure as defined in paragraph 14 of this Attachment, and is not land acquisition, development and construction as defined in paragraphs 27 and 28 of this Attachment.

Dependent on property cash flows
 1.          If the prospects for repayment of the exposure depend primarily on the cash flows generated by the asset or other real estate assets owned by the borrower, an ADI must apply the risk weights in Table 3 based on LVR and the classification of the loan as standard or non-standard.

 1.              Risk weights for commercial property exposures – dependent on property cash flows
LVR (%)       Risk weight (%)
≤ 60          60.01 - 80       > 80
Standard      70               90    110
Non-standard  150

Not dependent on property cash flows
 1.          If the servicing and repayment of a commercial property exposure does not meet the criteria for dependence as set out in paragraph 23 of this Attachment, an ADI must apply the risk weights in Table 4 based on counterparty type, LVR and the classification of the loan as standard or non-standard.

 1.              Risk weights for commercial property exposures – not dependent on property cash flows
Counterparty              Risk weight (%)
LVR ≤ 60                  LVR > 60 or non-standard
Rated corporate           60, or                        Risk weights in Table 10
                          the risk weights in Table 10
All other counterparties  60                            According to applicable risk weight in Attachment B

 1.          An exposure may be classified as 'commercial property exposures - not dependent on property cash flows' where an ADI has recourse to a borrower that meets all of the following criteria:
         1.           the borrower is a corporate entity that is managed by a recognised, professional and reputable management team;
         2.           the ADI's exposure to the borrower is not specifically or substantially financing limited recourse development projects;
         3.           the borrower has greater than $250 million in tangible assets, to which the ADI has unconditional recourse;
         4.           real estate assets are sufficiently diversified such that:
                 1.             no single asset represents greater than 25 per cent of the borrower's real estate portfolio by value; and
                 2.          real estate assets are not concentrated in one particular specific geographic location; and
         5.           for real estate operators or investors, tenants are sufficiently diversified such that no single tenant represents:
                 1.             greater than 25 per cent of portfolio net rental income for portfolios of retail shopping centres that typically require significant anchor tenants to attract specialty tenants; and
                 2.          greater than 10 per cent of portfolio net