waterfall_chartSecuritization

Bond Tranche Waterfall

Understand CMBS deal structure, tranche waterfall mechanics, and capital stack positioning in today's market.

Data as of Live FRED Data · Sources: Federal Reserve (FRED), CoStar, CBRE Research

2024 CMBS Volume

$18B

Down from $70B (2021)

AAA Cost of Capital

5.62%

Financing rate + 140-160bps

BB Spread

285bps

Above SOFR swap rate

Avg Deal Size

$850M

Per securitization

CMBS Tranche Waterfall

Click any tranche to see detailed risk profile, buyer base, and market conditions.

AAA Tranche Details

Senior-most tranch, first to receive principal and interest. Investors typically hold to maturity.

Deal Proportion

65%

Spread Above SOFR

140-160bps

Typical Buyer Base

Pension fundsInsurance companiesJapanese banksMoney managers

Cash Flow Waterfall Mechanics

How Cash Flows Through the Waterfall

1. Principal & Interest Collections

Loans pay monthly P&I
Servicer collects payments
Trustee aggregates balance

↓

2. Distribution Down Waterfall

AAA receives full coupon first
AA, A, BBB follow in order
Equity receives residual

Key Point: If loan defaults or losses occur, junior tranches absorb losses FIRST. For example: if a $100M deal has $5M in losses, it affects Equity (2%) and BB (5%) fully, but AAA, AA, A, BBB are protected.

CMBS vs. Balance Sheet Lending

CMBS Securitization

Wider distribution of credit risk
Execution timelines 90-150 days
Multi-tranche structure (AAA-Equity)
Transparent pricing, marked to market
Better for large/$100M+ deals
Higher upfront cost, rated by agencies

Balance Sheet Bank Loan

Concentrated on bank balance sheet
Faster closure: 45-75 days typical
Simpler structure (senior/mezz)
Pricing less transparent, hold-to-maturity
Better for smaller/$5-75M deals
Lower upfront cost, faster amendments

Market Insights

trending_down

Volume Collapse

CMBS down 70% from $70B (2021) to $18B (2024). Recovery targets $20-25B by 2026.

shield

AAA Resilience

AAA tranches remain sought-after. Spreads stable at 140-160bps. Institutional capital available.

warning

Equity Distress

Equity value compressed to near-zero in current market. Recovery contingent on spread compression.

speed

SASB Growth

Single-asset structures gaining share (30-40% of mix) due to speed and simplicity.

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CMBS structures and tranche details are for educational purposes only. Actual deal structures, ratings, and risk profiles vary significantly by securitization and market conditions. This page is not investment advice. Consult with your investment team and review offering documents before participating in any CMBS transaction. Past performance does not indicate future results.

Market Data

10Y Treasury4.02%—

Fed Funds3.64%—

NNN Avg Cap5.87%—

30Y Mortgage5.98%—

CMBS Spread224 bps—

NNN Spread185 bps—