CRE CLO Issuance Picks Up After Coming to a Halt in the Spring

After a pause earlier in the year, the CRE CLO market is beginning to show signs of life, with new deals happening in recent months. But recovery in the segment is still expected to be slower than for traditional CMBS loans.
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Part of the issue is that unlike CMBS loans, which are backed largely by stabilized properties, CLOs focus on assets that are in some sort of transition, involving renovation or redevelopment. As a result, little income is often expected from these assets during the transition period. For this reason, one of the questions facing participants in the CLO market is whether projects can be completed on budget and on time, particularly challenging amid the COVID-19 pandemic. Another question is whether these properties will be able to meet their initial leasing expectations post-transition as many real estate sectors continue to struggle.

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