CMBS SASB Transactions are Reserved for Large Properties or Portfolios
Single Asset Single Borrower (SASB) CMBS transactions occur when a CMBS lender takes one, very large property, and securitizes it into a single commercial mortgage-backed security. Sometimes, SASB transactions involve the security of a portfolio of properties owned by the same, or a related group of borrowers.
Single-asset refers to a loan issued for a single property, while single-borrower refers to a loan issued to a single borrower for one or more properties. True SASB loans are for one asset and one borrower, though multi-asset single-borrower loans are still referred to as SASB.
This is in contrast to traditional commercial mortgage-backed securities, which generally involve the securitization of 50+ CMBS loans, each representing a different asset and a different borrower, into one securities offering. Like traditional CMBS issuances, these loans are generally cross-collateralized/cross-defaulted, so the potential weakness of one loan’s performance can impact the entire portfolio. Like regular CMBS, SASB CMBS loans can be issued in both fixed and floating-rate varieties. Fixed-rate SASB issuances have traditionally been more common, though variable-rate SASB issuances are increasing in popularity.
Unlike regular CMBS loans, which are often issued for property types of various property qualities and classes, CMBS SASB loans are generally only issued to exclusive, class-A properties, such as luxury hotels and high-end apartment buildings in major MSAs, such as New York City or Los Angeles.
SASB Loan Sizing and Industry Alternatives
SASB loans generally start at around $200 million+, though some SASB loans have ranged between $1 and $3 billion.
There are few corollaries to SASB financing in the world of real estate capital markets, but alternatives to SASB include large private equity debt funds or even large portfolio loans issued by Fannie Mae for large portfolios of multifamily properties owned by one borrower, specifically the Fannie Mae® Bulk Delivery Loan or Fannie Mae Credit Facility.
In general, SASB issuances offer lower leverages than typical conduit loans, since lower LTVs mean higher credit ratings.
However, it should be noted that CMBS SASB portfolio loans offer greater LTV flexibility than individual SASB loans. For example, the LTV and DSCR limits are generally calculated at the portfolio level, rather than on the level of an individual property. For example, most individual CMBS loans top out at 75%, however, a property in a SASB portfolio loan may be allowed to reach 80-90% LTV, provided the entire portfolio’s LTV remains lower than 70-75%.
Trends in the CMBS SASB Market
CMBS SASB funding increased throughout 2018 and 2019, though was significantly slowed down by the pandemic. SASB transactions greatly rebounded in 2021. While overall CMBS loan issuances have been decreasing, SASB issuances have been skyrocketing.
For example, 11 SASB deals totaling a combined $7.7 billion were issued in April; from January to April 2021, $16.9 billion in CMBS SASB loans were issued increase of 76.1 percent from the same period last year. The Kroll Bond Rating Agency estimated that $50.8 billion of CMBS SASB loans were issued by the end of 2021.
Recent SASB offerings include a $3 billion 10-year, fixed-rate loan issued for the REIT SL Green Realty for its One Vanderbilt tower a luxury NYC office building, the largest SASB securitization to date.
In contrast to previous SASB issuances, which were often purchased in small amounts by several institutional investors, many recent SASB loans have been purchased in whole by one institution, such as a sovereign wealth fund or institutional wealth management firm. Private equity firm Blackstone and asset management firm Brookfield are some of the largest players in the market, issuing about one-third of all SASB loans in 2019.
Just as for other types of CMBS loans, CMBS SASB lenders are required to hold onto 5% of the loan on their portfolio to discourage overly-risky lending. This is referred to as “risk-retention” and is a result of the Dodd-Frank Act, which was signed in the aftermath of the 2008 financial crisis, which lead to major defaults in the CMBS lending market.