With apologies to Madeline Kahn, in this case, it indeed is twu, it’s twu! The CRE CLO technology is maturing and evolving into the stable, match term, non-recourse, non-marked to market, dynamic portfolio lender lever technology that its fans (me among them) always thought that it could be. It’s just taken some time.
Tainted by the wildly different, and in hindsight entirely zany, CRE CDO securitization from before the Great Recession (most, but not all, of which died ingloriously before that recession was over) and after having creeped back into usage in the marketplace between 2012 and 2016, the CRE CLO as a technology to securitize whole mortgage loans is finally maturing into a stable and useful tool in the toolbox of the portfolio lender. Growing from a handful of deals in the period 2012 through 2016, total CRE CLO production was around $15 billion; in 2017 it was $7.7 billion; in 2018 it was $14 billion; and in 2019 it would appear to be on track to perhaps be a $20 billion securitization market. Ignoring for the moment black swans, orange swans, dictators, Brexiteers and sundry other loons on a mission to derail our economy or the modern world writ large, the CRE CLO market sector should continue to grow at a respectable pace with only the obligatory brief respite shared by all structured products, during the next recession, whenever it might occur. Continue Reading