Our fine little CRE CLO business has exploded over the past couple of years, hasn’t it? Last year, around this time, I recklessly predicted for my friends at Commercial Mortgage Alert that we might hit $30 billion of issuance in 2021. I was the outlier…by a lot. Well, it looks like we’ll finish the year closer to $45 billion and it’s clear that in the first quarter of 2022 we will be on fire. Now, of course, I also thought that we’d have a fantastic year in early 2020 and then that pesky little bug changed our lives, so please consider my on-fire prediction subject to caveats, limitations and restrictions including, but not limited to, disease, dictators and the possibility that the Fed is making a colossal mistake.
All else being equal, the CRE CLO business will continue to grow and I don’t really see the appetite for this technology receding any time soon. Could it? Sure. Annoying black swans aside, if the curve radically changes shape and creates outsized demand for fixed rate product, the CRE CLO business, as it has grown up in the past couple of years, will see challenges. But more on this later.