Hot CRE CLO Market Drawing More Issuers
More commercial real estate CLO issuers are dusting off pro- grams — or initiating new ones — in what’s shaping up to be a record-setting year. Lument, the New York bridge lender formerly known as ORIX
Real Estate Capital, is preparing its first deal since it merged MAY 14, 2021 CMBS Shops Back Huge Multi-Family Buy 11 PIPELINE: CMBS/CRE CLOs Morgan Stanley three originators and rebranded in October. It’s expected to , Bank of America 13 million of oat and Barclays TOP FOREIGN-OWNED POR ing-rate debt to have committed TFOLIOS sprawling apartmen nance a Blackstone to originate $890 Bar- t portfolio in the San Diego a partnership’s begin tapping the market regularly again. Charlotte-based 15 RATED SERVICERS e New Yor re purchase of a T k fund giant a a. ruAmerica Multifamily nd its partner, L 2 CMBS Demand Solid in Rocky Market , struck os Angeles inve buy the workf a deal this week stment manager orce-housing por to pay more th ings, another bridge lender, is tentatively slated to launch its 2 a local orga tfolio. e seller an $1.4 billion Foreign Banks Up US Mortgage Books nization tha is the Conrad to activit t plans to use the Prebys Foundation, ies. sale proceeds 4 Single-Borrower Deals Still in Favor Eastdil to continue its charit Secured is broke able the nancing, ring the sale and debut deal in the second half. 6 Builder Eyes Debt for Phila. High-Rise which is expected advised the Blackstone have an to close in partnership initial term of two the next two we on ers, led years, plus thr eks or so. e l 6 SoCal Rental Project Gets Financing by Morgan Stanley ee one-year extension oan will , intend to securi options. Some $14.6 billion of CRE CLO deals have priced through tize the debt righ e lend- 8 Banks Join Deal for Boston Complex t away in a stand-alone See BUY on Page 20 9 Barings Touts Hot CRE CLO Mark May 13, and the market is on track to break the annual record Ambitious Hiring Effort et Drawing Mor 14 Survey: Banks Regained Share in Q1 More commer e Issuers cial real estate CL ing new ones — in wha O issuers are dust 18 Debt Eyed for 2 NY Rental Complexes Lument, t’s shaping up to be a r ing o programs of $19.2 billion set in 2019 by midyear. The activity comes the Ne ecord-setting y — or initiat- tal, w York bridge lender ear. 19 Apollo is preparing formerly k , KSL Write Fla. Hotel Loan its rst deal since nown as ORIX Real October. It’s expected it merged thre Estate Capi- 20 Barings, to begin ta e originators a alongside a reinvigorated commercial MBS market, which con- MetLife Lends on another pping the market nd rebranded in Tenn. Apartments bridge lender, regularly again. second half. is tentatively sla Charlotte-based 23 Acore Backs San Diego Rental Project ted to launch its Some $14.6 billion of CRE CL debut deal in the tinues to produce a steady stream of deals. ket O deals ha is on track to bre ve priced th ac ak the annual re rough May 13, and the ma tivity comes alon cord of $19.2 billio r- to p gside a reinvigora n set in 2019 by roduce a steady str ted commercial midyear. e Several issuer counsels said they expect to see the strong eam of deals (see article o MBS market, which THE GRAPEVINE Several issuer counsels said they ex n Page 4). continues “With active pect to see the s loan originatio trong momen funding levels, n, availability tum continue. BMO Capital we are seeing CRE of investor capi momentum continue. has hired commer CLO activity tal and attracti structuring v cial MBS that is strong ve eteran Mary Kunka, and continuing,” starts J who said une 1 as a managing dir See HOT on Page 10 New Y ector in Starwood “With active loan origination, availability of investor capital ork. As part of the CMBS g Seeks by Paul Vanderslice, roup led Debt for Big she’ll struc Starwood Capital Apartment and privat ture agency is in the market Deal e-label o erings. K of a far- ung p for $790 m and attractive funding levels, we are seeing CRE CLO activity ing from N unka’s com- ortfolio of mul illion of debt to ew York-based Eastdil Secur ti-family pro nance its purchase via las Lument, forme ed has the as perties. t year’s merger bet d package signment. It’s Estate Capital ween Hunt Real with a ve-y asking for quotes and ORIX Real Estate Capital. co ear term. Sour on a oat Steven Kolyer, uld be broken o ces suggested a ing-rate debt that is strong and continuing,” said who leads Prior to joining H ut as mezzanine deb portion of the unt as a managing dir Starwood, of Miami t. nancing deal tor in 2018, she was a dir ec- prop Beach, has agr ector at Citigr erties from A eed to acquir and also spen oup tlanta fund oper e the roughly 5,200-unit pool Sidley Austin. t ve years at UBS. around $231,000/unit. ator Centennial Holdings of the CLO practice at “The current strong CRE for abou e collateral t $1.2 billion, Citadel this m consists of p or onth hired Adam Moriwaki lina, Tennessee and T roperties in Florida, as a CMBS s exas built b Georgia, Mary pecialist in Ne More detail etween 2006 and 2017. land, North Caro CLO market is looking less temporary and more sustainable for Chicago-based w York. At the on the portfolio - rm, he helps e nial typicall ’s makeup couldn valuate y focuses on Class-A ’t be learned immedia See GRAPEVINE on Back P in the Sout garden-style tely. Cent age heast, Southwes and mid-rise en- t and Mid-Atlant apartment comp some time.” ic. It targets prop lexes erties that are See ST 10 to Richard Jones of Dechert said more issuers will enter the ARWOOD on Page 18 market. There have been three newcomers so far this year, and Barings will be a fourth. “I’ve said for a long time that the CRE CLO business is des- tined to keep growing,” he said. “There is spectacular alignment between investors and issuers. As the market sees more [deals], years. Its last offering was a $350 million deal in 2018 under they get more used to it, and scale begets scale.” its previous name. One of the three originators it acquired was Lument isn’t new, but it’s been out of the market for several See HOT on Page 2
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look at the supply/demand technicals, it makes sense. You have Hot ... From Page 1 a lot of people who need these loans, you have lenders who are Hunt Real Estate Capital, which issued two deals in 2017 and starved to make them, new-issue volume overall is down, and 2018 totaling $634.2 million. Lument has been ramping up you have a buyer base that is willing to take [deals] out at rea- during the pandemic, opening a Boston office and adding orig- sonable levels.” inators there. Investors have said they expect it to become a That dynamic, the investor said, could last anywhere from more frequent issuer. three to five years, allowing the CRE CLO sector to run hot as Barings is building its staff. It has a deep-pocketed parent the market adjusts to the new normal. Eventually, he believes, in MassMutual and vast experience with corporate CLOs. That borrowers will go back to wanting the stability of long-term, side of its business issues in the U.S. and Europe, and has long fixed-rate loans. been among the more active producers, with 11 deals totaling “As the economy comes out of the pandemic, we expect to $4.2 billion during the pandemic. see continued strong demand from both borrowers and lend- Those who have issued CRE CLOs since the onset of the ers for properties that are ripe for a transitional play and think coronavirus crisis last year include a mix of lenders that rely there will be robust [CLO] activity over the next couple of heavily on the capital markets, such as Arbor Realty, Bridge In- years,” said Stuart Goldstein, who co-leads Cadwalader Wick- vestment, LoanCore Capital and MF1 REIT, as well as others that ersham’s capital-markets practice. “It’s hard to know what will are more opportunistic, such as Starwood Property. The latter happen after that.” is among shops that have ready access to many forms of cheap Jeff Rotblat, also a partner with Cadwalader, added that as capital and typically tap the CLO market only when spreads are long as loans continue to perform and meet investors’ expecta- very tight. tions, the only question is how much demand there will be for Blackstone Mortgage was thought to be in the opportunistic transitional properties. camp, but as investor appetite has grown along with deal sizes, But increased lending activity may lead to more transac- it became a more regular issuer. It’s completed three deals in 15 tions, which could fuel the market further, one issuer said. months after a gap of two years following its first offering. “More loan origination could allow people who haven’t done Production last year was dismal, with $8.7 billion in deals a deal to do one or, for those who have, to do another one,” he ending three consecutive years of CLO growth. Only seven said. firms, including Blackstone, have done at least two deals since Some issuers already are thinking longer term. Regarding the pandemic struck. the possibility that bridge lenders could eventually be pushed But sharply tightening spreads in January prompted numer- aside by conduit CMBS lenders as properties stabilize, one ous issuers to come to the market and empty warehouse lines. said it could be the other way around. While adding fixed- The loan portfolios of nine of this year’s 18 deals were seasoned rate loans to CLO portfolios might be complicated, requir- more than one year, according to Commercial Mortgage Alert’s ing hedges by both issuers and investors, it might still make CRE CLO Database. Investors are optimistic that issuers will sense. ramp up loan production and bring another slew of deals in “Lending is picking up, so by the time the pre-Covid loans the second half. run out, everyone can rebuild the next bundle,” he said. “This One said the uncertain nature of the crisis and an expected could be a $25 [billion] to $30 billion issuance year, which need for transitional loans are being met with investor appetite would be great. The bigger it gets, the more liquid it gets, and for shorter-term, floating-rate bonds. the better spreads get. There is a real argument that we could “This is the flavor of the month,” he said of CLOs. “If you supplant the conduit market.”