Key parties, documents and terms of a commercial mortgage-backed securities transaction
Produced in partnership with Ed Bellamy of Paul Hastings
Key parties, documents and terms of a commercial mortgage-backed securities transaction

The following Banking & Finance guidance note Produced in partnership with Ed Bellamy of Paul Hastings provides comprehensive and up to date legal information covering:

  • Key parties, documents and terms of a commercial mortgage-backed securities transaction
  • An introduction to commercial mortgage-backed securities
  • Diagrammatic overview of a typical CMBS transaction
  • Diagrammatic overview of ongoing cashflow
  • Key parties of a CMBS transaction
  • Principal documents and key terms of a CMBS transaction

BREXIT: The UK is leaving the EU on Exit Day (as defined in the European Union (Withdrawal) Act 2018). This has an impact on this Practice Note. For guidance, see Practice Note: Brexit—impact on finance transactions—Brexit planning and impact—financial services, Brexit—impact on finance transactions—Key issues for securitisation transactions and Brexit—impact on finance transactions—Derivatives and debt capital markets transactions—key SIs.

An introduction to commercial mortgage-backed securities

Commercial mortgage-backed securities (CMBS) are notes that are offered to investors which are collateralised by a loan or a pool of loans secured by commercial real estate property(ies) (eg office blocks or factories). The basic structure for a CMBS transaction typically involves the following:

  1. A special purpose vehicle (SPV) (the Issuer) is created and raises funds by issuing the CMBS notes to investors.

  2. The Issuer utilises the proceeds from the issue of the CMBS notes to either:

    1. purchase one or more loans (each a 'Loan) which are secured by way of a mortgage over commercial real estate property(ies) from an originating bank (the Originator), or

    2. lend directly as the original lender of the underlying Loan(s) to the underlying borrower(s) (each a Borrower) for the purpose of acquiring commercial real estate property(ies)

    the first being the more common approach than the second scenario (known as an Agency CMBS) which