Commercial Real Estate Collateralized Loan Obligations Primer

by Jennifer Johnson of the NAIC

"CRE CLOs are CLOs that are collateralized by CRE loans that are transitional,or short-term and floating rate. Income earned on the underlying CRE loans—i.e., principal and interest payments—is utilized to make debt service payments to noteholders. Due in part to the strong U.S. economy and investor appetite for higher yields, the CRE CLO market experienced substantial growth in 2019.Some sources cite the first CRE CLOs having been issued around 2012 or 2013. CRE CLOs are structured with reinvestment periods(usually one to three years),during which time the collateral manager, which manages the underlying portfolio of loans, may buy and sell loans in and out of the underlying portfolio.In addition to having a collateral manager to manage the portfolio, CRE CLOs may have a servicer to service the underlying CRE loans."

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Commercial Real Estate Collateralized Loan Obligations Primer

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