Learn about the evolution of CRE CLO post-2008 crisis, controversies around luxury construction projects, distressed properties, and refinancing challenges. Discover the differences between CRE CLOs and CMBS deals, and how investors are protected in CRE CLOs.
CRE CLOs aim to provide safer investment options by incorporating investor-requested protections post-GFC era.
Modern CRE CLOs offer increased investor security through first-lien mortgage collateral and enhanced risk mitigation measures.
Deep dives
Evolution from Risky Pre-GFC Products to Safer Options
The evolution from risky pre-GFC products to safer options started with large financial institutions engaging with investors for feedback. Deals from 2012 onwards incorporated investor-requested protections, shifting towards less risky products. The collateralized loan obligations (CLOs) were introduced to address issues from the Great Financial Crisis (GFC), focusing on a more secure and investor-friendly approach.
CRE CLOs vs. CDOs: Managing Transition and Risk
Comparing CRE CLOs to pre-GFC collateralized debt obligations (CDOs) showcases significant improvements. The modern CRE CLOs are backed by first-lien mortgage collateral, reducing risk and increasing investor appeal. Enhanced subordination levels and narrower reinvestment periods contribute to the product's lower risk profile and alignment of interests between investors and lenders.
Protective Measures and Remedies in CRE CLOs
In CRE CLOs, protective measures are in place to prevent delinquencies and ensure asset performance. Sponsors can repurchase credit-impaired or defaulted assets from the pool to shield investors. Constant communication between borrowers and managers maintains loan performance, with active management to address market shifts and interest rate impacts. The technology is designed to safeguard investors and manage assets effectively, navigating potential challenges in a dynamic environment.
After the 2008 financial crisis, investment managers came up with a new securitized product: the collateralized loan obligation, or CLO, for commercial real estate. It was designed to correct some of the risks that came with its predecessor, the collateralized debt obligation.
But what exactly is the CRE CLO and how does it work? Deconstruct enlisted attorney and CLO expert Stewart McQueen at Dechert to break down the product.
Get the Snipd podcast app
Unlock the knowledge in podcasts with the podcast player of the future.
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode
Save any moment
Hear something you like? Tap your headphones to save it with AI-generated key takeaways
Share & Export
Send highlights to Twitter, WhatsApp or export them to Notion, Readwise & more
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode