Single-Asset Single-Borrower CMBS Explained
Start Your Application and Unlock the Power of Choice$5.6M offered by a Bank$1.2M offered by a Bank$2M offered by an Agency$1.4M offered by a Credit UnionClick Here to Get Quotes!Commercial mortgage-backed securities or CMBS loans are a popular form of commercial real estate financing. CMBS loans are financial instruments that utilize first-lien mortgages on commercial properties as collateral — before being pooled with similar loans, packaged into bonds, and finally sold to investors on the secondary market. With that in mind, a Single Asset Single Borrower (SASB) CMBS loan is when a CMBS lender takes a single, very large property, and securitizes it into a single commercial mortgage-backed security.
Understanding SASB CMBS
SASB CMBS loans may seem complicated at first, but the name actually explains them quite well. The “single asset” portion of the moniker refers to financing issued for a single property, while the “single borrower” portion denotes a loan issued to a single borrower for one or more properties. While multi-asset single-borrower CMBS financing exists, they are almost always still referred to as single-asset single-borrower loans.
Single-asset single-borrower conduit loans are a contrast to traditional CMBS financing, which usually involves the securitization of multiple loans — each typically representative of a unique asset and a unique borrower — into one security.
Much like the more common CMBS loans, SASB CMBS loans are offered with fixed interest rates and are generally cross-collateralized and cross-defaulted, continuing the risk involved in purchasing and holding weaker-ranked tranches of commercial mortgage-backed securities. One substantial difference from traditional CMBS financing is that, unlike traditional CMBS financing, SASB loans are generally only reserved for exclusive, Class A properties like high-end apartment buildings in top markets.
SASB commercial mortgage-backed securities typically include loans of at least $200 million, though these SASB loans may range as high as $3 billion. SASB issuances are known to offer lower leverage than regular CMBS loans, however, investors should note that an SASB CMBS portfolio loan offers much more flexibility when it comes to LTV ratios than with an individual single-asset single-borrower loan.
While most SASB loans are collateralized by a single property, they can also be collateralized by a group of cross-collateralized/cross-defaulted properties, so long as they are all owned by the same borrower. In some rare cases, SASB loans can also comprise a group of cross-collateralized/cross-defaulted properties owned by related borrowers.
Related Questions
How do CMBS loans work?
- Unlike some other types of apartment financing, CMBS loans are securitized (pooled into a large group of CMBS loans) and then sold to investors on the secondary market. This is generally good for lenders, who can reduce any risk associated with holding the loan.Learn more →
How do I calculate LTV?
- An LTV ratio, or loan-to-value ratio, is calculated by dividing the amount of debt by the value of the collateral property. The result is expressed as a percentage.Learn more →
What is a single-asset single-borrower CMBS loan?
A Single-Asset Single-Borrower (SASB) CMBS loan is a loan that 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, or a group of cross-collateralized/cross-defaulted properties all owned by related borrowers. SASB CMBS loans are offered with fixed interest rates and are generally cross-collateralized and cross-defaulted.
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What are the advantages of a single-asset single-borrower CMBS loan?
Single-asset single-borrower CMBS loans offer several advantages. First, they are typically reserved for exclusive, Class A properties like high-end apartment buildings in top markets. This means that the loan is secured by a high-quality asset, which can help to reduce the risk of default. Second, SASB CMBS loans are generally offered with fixed interest rates, which can help to provide more stability and predictability for the borrower. Third, SASB loans 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. Finally, SASB CMBS loans can range from $200 million to $3 billion, which can provide borrowers with access to large amounts of capital.
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What are the disadvantages of a single-asset single-borrower CMBS loan?
The disadvantages of a single-asset single-borrower CMBS loan include:
- Less autonomy in the operation of the property and limited flexibility to deviate from the terms of the loan documents. Source
- Difficulty in releasing collateral. Source
- Expensive to exit. Source
- Lock outs often prevent prepayment or up to two years. Source
- Reserves required. Source
- Secondary financing (i.e. mezzanine debt or preferred equity) not always allowed. Source
- Occasionally more rigid down payment, income verification and credit score requirements. Source
- Sometimes requires some sort of recourse for borrower. Source
- Often shorter amortizations and shorter fixed periods than CMBS and agency loans. Source
- Stricter with cash out refinances. Source
What are the eligibility requirements for a single-asset single-borrower CMBS loan?
In general, lenders look at two major metrics when deciding whether to approve a CMBS loan; DSCR and LTV. However, they also look at debt yield, a metric which is determined by taking the net operating income of a property and dividing it by the total loan amount. This helps determine how long it would take a lender to recoup their losses if they had to foreclose on the property. And, while it’s true that CMBS loans are mostly income based, lenders still typically require a borrower to have a net worth of at least 25% of the entire loan amount, and a liquidity of at least 5% of the loan amount. Source
What are the typical terms of a single-asset single-borrower CMBS loan?
Single-asset single-borrower CMBS loans typically involve loans of at least $200 million, and often range up to $800 million to $1 billion+. These loans are usually collateralized by one, very large property, and can also be collateralized by a group of cross-collateralized/cross-defaulted properties all owned by the same borrower. SASB CMBS loans are offered with fixed interest rates and are generally cross-collateralized and cross-defaulted. They are usually reserved for exclusive, Class A properties like high-end apartment buildings in top markets. SASB CMBS loans may offer lower leverage than regular CMBS loans, and can have up to a 92% LTV (unlikely to occur, in practical terms) in order to achieve a B credit rating.
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