Pari passu notes split a single large CRE loan into multiple equal-priority pieces sold into different CMBS trusts. The structure lets originators distribute large loans (typically $100 million plus) across multiple deals, spreading concentration risk while preserving uniform underlying loan terms across the pieces.
Why do originators use pari passu structure?
CMBS pools have concentration limits (often 7 to 10 percent for any single loan). A $250 million loan would exceed the limit in any one pool, so the originator sells $50 million pari passu pieces into several pools. All pieces share equal priority on cash flow and remedies.
Does it affect the borrower?
Generally no, the borrower deals with one master servicer that coordinates among the trusts holding the pari passu pieces. Workouts and modifications can be slower because the controlling trustee must obtain consents from multiple trusts, which is a real but manageable complication.
Sources
- Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations · Mortgage Bankers Association · 2026-Q1