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

What is a “Control Appraisal Event”
• It is not uncommon, even in the case of A/B participation
arrangements relating to loans that will not be securitized, for Control
Appraisal Event features to be utilized for purposes of determining
the controlling holder for the loan.
• However, one can find more flexibility in structuring the definition of
Appraisal Reduction Amount and the formula for whether a Control
Appraisal Event exists, in non-securitized deals. For example, the
collateral may not be valued based on a 90% ―haircut‖ but rather on
the basis of 100% of its appraised value, or only certain types of
accruals or sums due on the A tranche or loan may be taken into
account in calculating the Appraisal Reduction Amount (such as nondefault
rate interest).
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