A/B Tranching of Commercial Real Estate – Secured Loans: An ...

What is a “Control Appraisal Event”
• To illustrate these principles with a highly simplified example, assume
a $100,000,000 mortgage loan has been tranched into a $75,000,000
A tranche and a $25,000,000 B tranche.
• Assume that the loan is interest-only and no principal payments have
been made.
• Assume that following an Appraisal Reduction Event (discussed
below), the servicer has obtained an appraisal of the mortgaged
property that contains a $90,000,000 conclusion of value.
• Further assume that $1,000,000 of interest has accrued and is past
due, there have been no advances, all property taxes, assessments,
insurance premiums and ground rent are paid current, no other sums
are due on the loan, there are no reserves and no realized losses
have been allocated to the loan.
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