Single Asset, Single Borrower (SASB) loans are very large loans made by very large lenders to very large corporations. Because of the role they play in greasing the wheels of commerce and the lives of those who invest in it, it’s worth taking a Millionacres moment to learn a bit more about them.
A SASB loan in its simplest form is exactly what the name suggests. It is a single loan made to a single borrower and secured by a single property which is then securitized and sold in the secondary market as an investment for those buyers.
Several sticks in one package
SASB loans are typically $ 200 million to $ 1 billion or more and they are often bundled for secondary commercial mortgage-backed securities (CMBS). Additionally, a single borrower can involve more than one property in the transaction, and more than one borrower and lender can be involved.
This flexibility has made SASB loans a popular way for major operators to commercial real estate (CRE) to finance very high-end real estate.
For example, CMBS.loans reports that Brookfield Management Group received a $ 1.2 billion SASB loan from Citibank and Goldman Sachs to refinance the iconic Bahamian-based Atlantis Resort and Casino in July 2018. And, a few months earlier, in April 2018, Blackstone Group Real Estate Partners received a $ 382 million SASB loan from Morgan Stanley and Wells Fargo.
Major League Funding for Major League Properties
While putting all your eggs in one basket isn’t typical investment advice, SASBs aren’t your typical loan. They are used by highly rated borrowers to obtain financing from major lenders for high end properties. Their credit scores and loan-to-value ratios (LTVs) show that, according to this blog capital markets advisers at Multifamily Loans:
“(SASB) transactions may have lower LTVs than other types of CMBS loans because LTVs and loan credit ratings have an inverse relationship. For example, AAA-rated securities for multi-family properties should have an LTV of no more than 50%, while they might have an LTV of up to 92% (unlikely, in practical terms) in order to achieve a rating of. credit B.. “
This rigor in underwriting is also reflected in the performance of the SASB. A Kroll Bond Rating Agency (KBRA) study found only six of 421 such loans in default in 25 years. Five of them were backed by hotel guarantees, according to KBRA, and that was from 1993 to 2018.