NEW YORK, Sept. 19, 2019 /PRNewswire-PRWeb/ -- Trepp, LLC, a leading provider of information, analytics, and technology to the structured finance, commercial real estate, and banking markets, has released its CRE CLO Report: A Look at the Continued Rise in CRE CLO Issuance. The full report can be accessed here: https://info.trepp.com/a-look-at-continued-rise-in-cre-clo-issuance-pr.
From a 2019 year-to-date standpoint, Trepp has modeled 20 CRE CLO transactions with an aggregate balance of just under $13 billion based on those with a scheduled closing date through August. This is up from a tally of $9.16 billion – an increase of nearly 42% – from the same period in 2018.
While most had expected CRE CLO new issue volume to remain roughly flat year-over-year, overall activity has proven to be relatively accelerated over the course of the past eight months. Based on a simple annualized calculation, total issuance for 2019 could reach $19.5 billion if the current pace sustains over the next four months.
"There are several factors fueling the asset type's solid issuance growth in 2019, the first being the continued strength of the US economy," said Trepp Research Analyst, Catherine Liu. "While many have predicted a slowdown – and one may yet come – the financial markets have been steady enough for lenders to maintain their support for borrowers with transitional or 'story properties.'"
Industry participants actively monitoring the sector have noticed the rising popularity of the managed structural type in recent vintage CRE CLOs (which are evidenced in Trepp's database as deals with built-in reinvestment periods). Its use has been garnering greater acceptance as the vehicle increasingly differentiates itself in credit quality from the heavily scrutinized pre-crisis kitchen sink CDOs laden with subordinate debt. By comparison, post-crisis securitizations are delineated by issuer "skin in the game" and primarily consist of first-lien mortgages.
Investors worried that CRE CDOs are just a redux of CRE CDOs 2004-2008 should take comfort from several improvements made to the sector over the last 10 years. The amount of leverage afforded by borrowers in 2019 is nowhere close to the leverage offered a decade ago. The DSCR and LTV "drift" over the last few years has also been modest – meaning lenders have avoided the excesses seen before the financial crisis. As long as discipline remains, volatility remains limited in the CRE space, and the US economy soldiers on, CRE CLOs should remain an attractive structured financing alternative with its low delinquency and loss profiles and its competitive yield offerings.
For additional details, such as a CRE CLO issuance overview and analysis on all major property types download our report, A Look at the Continued Rise in CRE CLO Issuance: https://info.trepp.com/a-look-at-continued-rise-in-cre-clo-issuance-pr. For daily CMBS and CRE commentary, follow @TreppWire on Twitter.
SOURCE Trepp
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