How Single Asset, Single Borrower CMBS Loans Work
Single Asset Single Borrower (SASB) CMBS transactions involve the securitization of a single loan, which is typically collateralized by one, very large property. SASB transactions are typically based on loans of at least $200 million, and often range up to $800 million to $1 billion+. While most are collateralized by one property, SASB loans can also be collateralized by a group of cross-collateralized/cross-defaulted properties all owned by the same borrower (much like a Fannie Mae Bulk Delivery Loan or Fannie Mae Credit Facility financing, though with much less flexibility). SASB CMBS can also involve group of cross-collateralized/cross-defaulted properties all owned by related borrowers.
Over the first quarter of 2018, CMBS SASB deals increased by over 200%, and, while volume is expected to slow over the next 12-24 months, CMBS lenders like SASB deals, as they often involve very large and exclusive properties, which are often owned by highly creditworthy borrowers. Single asset single borrower deals may have lower LTVs than other types of CMBS loans, as LTVs and the credit ratings for loans have an inverse relationship. For instance, AAA rated securities for multifamily properties would need to have an LTV of no more than 50%, while they could have up to a 92% LTV (unlikely to occur, in practical terms) in order to achieve a B credit rating.