Glossary

A/B Note Structure

Also known as: A/B Split, A/B Note

A loan-level structure that splits a single mortgage note into a senior A-note and a subordinate B-note, allowing the two pieces to be sold, rated, or retained separately while sharing one underlying collateral pool and loan documents.

Commonly used on large or complex CRE loans, the A/B split creates internal subordination within a single loan rather than at the securitization trust level. The A-note typically represents the senior, more conservatively sized portion (e.g., to a lower LTV threshold) and is sold into a CMBS pool or syndicated to institutional buyers, while the B-note absorbs first losses and is often retained by the originator, sold to a mezzanine-style investor, or held by a debt fund. The split is governed by an intercreditor or co-lender agreement dictating cash flow waterfall priority, control rights, and workout/foreclosure decision-making between the A and B noteholders. Because both notes derive from one loan document and one borrower obligation, the A/B structure differs from a true mezzanine loan, which is a separate loan secured by a pledge of equity interests rather than the real property itself.