This episode explores the intricacies of Commercial Real Estate (CRE) Collateralized Loan Obligations (CLOs), a less-known variety of CLOs compared to corporate loan CLOs. Against the backdrop of Shiloh Bates's experience in corporate CLOs, Mike Comparato, a CRE CLO manager at Benefit Street Partners, provides insights into the structure and characteristics of CRE CLOs. More significantly, the discussion delves into the composition of CRE CLOs, revealing that they typically comprise 15 to 60 senior mortgages on shorter-duration, floating-rate, transitional commercial real estate assets. For instance, the typical CRE CLO size ranges from $800 million to $1.2 billion, aggregating numerous individual loans. The conversation also touches upon the loan-to-value ratios, spreads, and capital structures of CRE CLOs, highlighting their differences from corporate loan CLOs. Finally, the episode discusses the trends in CRE CLO issuance, the role of macro-economic factors in investment decisions, and the challenges faced by retail investors seeking direct exposure to this asset class. Emerging industry patterns reflected in the discussion include the preference for newer, higher-quality assets in liquid markets and the increasing importance of non-economic factors in choosing between bank financing and CRE CLO securitization.
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