The Real Deal New York

Real estate CLO issuance could top $20B this year: report

Risky mortgage-backed securities are making a comeback
July 31, 2018 04:00PM

The Wall Street Bull bleeding (Credit: iStock)

The issuance of Collateralized Loan Obligations backed by commercial real estate debt could top $20 billion this year, according to analysts. That would be the highest volume since the global financial crisis.

CLOs are similar to commercial mortgage backed securities but tend to be made up of riskier mortgages like bridge loans with floating interest rates. They are the successors to the infamous Collateralized Debt Obligations, which helped almost bring down the global financial system in 2008.

“Right now there’s still decent discipline in the market — although there may be some outliers on certain deals — but there is always risk for any commercial real estate business plan,” David Eyzenberg of l real estate investment banking firm Eyzenberg & Co. told Bloomberg. “With CRE CLOs, the cash flow that’s there today is almost irrelevant to what happens later.”

The Real Deal broke down the rise of CLOs, and the risks they create, in March.  [Bloomberg] — Konrad Putzier