Kroll Bond Rating Agency (KBRA) provides a recap of CRE Finance Council's (CREFC) fall commercial real estate (CRE) collateralized loan obligation (CLO) conference: A World in Transition: CRE CLOs and the Loans Fueling the Post-Pandemic Era, held on October 28 in New York City.
It was fitting that CREFC's first hybrid conference since the onset of the pandemic was its annual CRE CLO conference, as the segment is on track to achieve a record year of issuance of nearly $45 billion, which is likely to exceed commercial mortgage-backed securities (CMBS) conduit issuance. The event attracted around 400 attendees with around 300 in-person guests. The overall sentiment across the various panels was one of confidence that CRE CLOs are a durable product type that will be around for the foreseeable future, with tailwinds to continue at or above its current pace.
The day started with opening remarks from CREFC Chair Eric Thompson, Senior Managing Director and Global Head of Structured Finance Ratings at KBRA. He emphasized how the CRE CLO market has come of age and matured into a segment within CRE finance, with nearly 160 transactions issued over the past decade. A key part of the market's acceptance of CRE CLOs has been its performance, especially through the pandemic, with a delinquency rate that is under 1%. This rate is meaningfully less than that of CMBS, which continues to decline but is still over 5%. Throughout the day, it was reiterated how the sector's growth and strong performance have been fueled by the high concentration of multifamily loans; the alignment of interests between borrowers, CRE CLO managers, and investors; and structural features.
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KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA's ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.