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Single Asset Single Borrower (SASB) CMBS Loans: What You Need to Know
SASB CMBS transactions involve the securitization of a single loan, which is typically collateralized by one, very large property. Single Asset Single Borrower 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).
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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.
Related Questions
What are the benefits of a Single Asset Single Borrower (SASB) CMBS loan?
Single Asset Single Borrower (SASB) CMBS loans offer a number of benefits, including:
- Fixed interest rates
- Cross-collateralized and cross-defaulted loans
- Loans of at least $200 million, and often ranging up to $800 million to $1 billion+
- Lower leverage than regular CMBS loans
- Flexibility when it comes to Loan-to-Value (LTV) ratios
- Exclusive, Class A properties like high-end apartment buildings in top markets
What types of properties are eligible for a SASB CMBS loan?
CMBS loans are used to finance a variety of property types, including office and retail properties. Office assets such as traditional high-rises and low-rises, single-story office parks, medical office buildings, and mixed-use buildings are generally eligible for CMBS financing, as long as they are Class A or Class B. For retail properties, CMBS lenders generally prefer assets with strong, long-term anchor tenants and properties managed by experienced organizations.
For more information, please see this article.
What are the requirements for a SASB CMBS loan?
In order to qualify for a Single Asset Single Borrower (SASB) CMBS loan, properties must typically be worth in the hundreds of millions, be owned by highly reputable borrowers, and be located in ultra high-end markets. Additionally, SASB transactions are typically based on loans of at least $200 million, and often range up to $800 million to $1 billion+. LTVs for SASB CMBS loans may be lower 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. Source 1 and Source 2.
What are the advantages of a SASB CMBS loan compared to other financing options?
The advantages of a Single-Asset, Single-Borrower (SASB) CMBS loan compared to other financing options include:
- Flexible underwriting guidelines
- Fixed-rate financing
- Fully assumable
- Lenders and bondholders can potentially achieve a higher yield on investments
- Investors can choose which tranche to purchase, allowing them to work within their own risk profiles
In addition, SASB CMBS loans are becoming an increasingly popular form of financing for the largest and most exclusive commercial properties. For example, in July 2018, Brookfield Management Group received a $1.2 billion SASB CMBS loan from conduit lenders Citibank and Goldman Sachs to refinance the iconic Bahamas-based Atlantis Resort and Casino. And, a few months earlier, in April 2018, Blackstone Group Real Estate Partners received a $382 million CMBS SASB loan from Morgan Stanley and Wells Fargo.
In the first quarter of 2018, CMBS SASB loan volume increased nearly 230% over the first quarter of 2017, meaning that these loans are an increasingly popular product for both borrowers and CMBS investors alike. However, in order to qualify, properties must typically be worth in the hundreds of millions, be owned by highly reputable borrowers, and be located in ultra high-end markets.
What are the risks associated with a SASB CMBS loan?
The risks associated with a SASB CMBS loan are similar to those associated with any other CMBS loan. These include the risk of default, prepayment risk, and interest rate risk. Default risk is the risk that the borrower will not be able to make their loan payments, while prepayment risk is the risk that the borrower will pay off the loan early. Interest rate risk is the risk that interest rates will rise, resulting in higher loan payments for the borrower. Additionally, SASB CMBS loans are typically more expensive than other types of CMBS loans, as they involve larger loan amounts and higher credit ratings.
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How long does it take to get a SASB CMBS loan approved?
Single-Asset, Single-Borrower (SASB) CMBS loans typically take longer to approve than the standard 7(a) loan. According to CMBS SASB: Single-Asset, Single-Borrower Conduit Loans, the process can take anywhere from a few weeks to a few months, depending on the complexity of the loan and the borrower's financial situation. Generally, the more complex the loan, the longer it will take to approve.