Key points:
- Commercial Real Estate Collateralized Loan Obligations (CRE CLO) issuance surged from $19 billion in 2019 to $45 billion in 2021.
- 72% of collateral is linked to multifamily properties.
- Delinquent loans or those in special servicing rose to 8.6% in January but decreased to 7.4% in February.
- Issuers repurchase delinquent loans using cash reserves to avoid breaching asset coverage tests, amounting to $1.3 billion in 2023.
- Issuers employ strategies like loan extensions and modifications to maintain borrower compliance.
- 15% of Ready Caps loans have been transferred to special servicers.
Potential implication:
- Rising delinquencies and issuers’ maneuvers to manage them suggest underlying instability in the CRE CLO market.
Source:
As a follow-up, Bloomberg had a good article on the CLO space. A few highlights:
– CRE CLO issuance exploded from $19B in 2019 to $45B in 2021. 72% of collateral is tied to multifamily.
– Loans more than 30 days delinquent or in special servicing jumped to 8.6% in Jan, but…
— Joe Stampone (@Joe_Stampone) March 21, 2024