CRE CLOs Are Back. Here’s What You Need To Know

Joseph Iacono, CEO and managing partner at Crescit Capital Strategies

NEW YORK CITY–Earlier this Spring Kroll Bond Rating Agency assigned preliminary ratings to a CRE collateralized loan obligation that LoanCore Capital Markets was taking to the market. It was backed by an eye-popping $1.1 billion in first mortgages secured by a mix of 33 properties consisting of multifamily, office, mixed-use, industrial, hospitality and retail assets. For the two or so years prior, CRE CLOs had started to come back to the market, but the size of this deal — and to a lesser extent, its 24-month reinvestment period — brought some observers up short. The CRE CLO market, it had suddenly become clear, was back. Now, as it continues to grow it will have ramifications for borrowers and lenders.

This is not to say that CRE CLOs are anywhere close to their heyday before the recession. In 2007 and 2008 issuance was around $35 billion a year. The first vehicles to remerge after the financial crisis were in 2016 when between $2 billion to $2.5 billion of CLOs were issued, according to stats from Wall Street investment banks. Last year issuance was around $8 billion and this year estimates are that between $13 billion and $18 billion will be issued.