SFA Research Corner: Triple-A, Tested (and Breached?): SASB CMBS’s New Reality

Across asset classes, triple-A credit ratings are viewed as the benchmark for safety and low risk. For single-asset single-borrower (SASB) commercial mortgage-backed securities (CMBS)— where deals are backed by one commercial property or a group of cross-collateralized assets from a single borrower— this assumption is being put to the test. A 26 percent loss to the triple–A tranche of the SASB CMBS deal BWAY 1015-1740 marked a pivotal moment, prompting a broader reassessment of risk for this asset class. Barclays CMBS Research has since flagged growing stress in office and retail SASB CMBS deals, while Deutsche Bank Securitized Research warns that a tail of high-severity losses—some exceeding 60%—threatens the minority of SASB loans showing appraisal declines. Moving forward, adjusting to the evolving commercial real estate market will require a new understanding of rising financial vulnerabilities.