Multiborrower transactions

These areas are property specific and so an investor will require much more detailed information than would be the case for all but the largest exposures in a multiborrower transaction. 

Investing in CMBS, whether they are single-asset or multiborrower transactions, requires an appreciation of the nature of the underlying properties and the inherent sensitivities of the cash flows they generate. The type and extent of analysis undertaken should be tailored to reflect the characteristics of the collateral pool and also whether the proposed investment is at a senior or junior level in the capital structure. 

Large multiborrower deals, where numerous commercial property loans, originated to numerous borrowers and secured on a variety of properties are grouped together into one transaction, in a similar way to a traditional residential mortgage deal. Such a deal may be either a traditional true sale transaction or a synthetic credit-linked structure. 

Different techniques are necessary when analysing a large multiborrower CMBS transaction compared to one secured over a single or limited number of assets. This is reflected in the following sections, which briefly describe some of the more important factors in these analyses. In practice, a transaction may include a large number of loans but with significant exposure to a few valuable properties, in which case a combination of techniques will be most appropriate. 

The previous discussion has centred on some of the key credit areas for investors analysing multiborrower CMBS transactions. While much of this also applies to single-property transactions, the analysis necessary for these transactions differs significantly in its detail. Listed below are some of the key additional areas we believe investors should consider when analysing a single-asset deal ... 

In particular, many investors take comfort from a well-diversified multiborrower portfolio and seek to limit the concentration of risks associated with a single-asset transaction. While this approach is understandable and relevant to senior bondholders, this diversification is not necessarily beneficial to junior noteholders who are then exposed to potential losses across the entire portfolio. 

---