Issuance of CRE CLOs is down 80% from the $16.5 billion first-quarter peak as demand for bonds backed by floating-rate mortgages sputters, according to DRBS...
Issuance of a newer breed of real estate bonds designed to finance riskier commercial properties for short stretches has tumbled 80% from a $16.5 billion first-quarter peak, according to DRBS Morningstar.
But instead of financing home flippers with questionable credit, the newer brand of debt mostly hinges on payments from landlords on pools of floating-rate loans for multifamily properties, a “favored asset class” that accounts for about 77% of the outstanding CRE CLO collateral, according to the report.
CRE CLOs have been in the spotlight recently due to their higher risk of running into trouble as rates rise. Spreads on CRE CLOs last week were pegged at their widest levels of the year, with BBB-rated bonds near 535 basis points above the floating-rate SOFR benchmark rate, according to BofA Global data.
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